What should investors do about Pricol’s shares after the recent rally

We had given an ‘accumulate’ call on automotive instrument cluster leader Pricol, about a year ago. Its shares were trading at ₹460 then. Now they trade at ₹770, at about 6 per cent below the all-time high of ₹822 hit on August 20, 2026. At current price, the stock has delivered returns of almost 70 per cent since our call.

Business and earnings have expanded strongly in FY26 and in Q1 FY27, supported by robust vehicle demand following GST rationalisation. Pricol’s recently acquired (late FY25) business of polymer products is doing as well as the core business. The company has won multiple orders to supply instrument clusters to some of the best-selling models in the market. Capital expenditure of about ₹700 crore is also in the pipeline (for perspective, fixed assets turnover ratio was around 4x in FY26). Besides, Pricol’s board has also approved the demerger of the instrument cluster business (DICVS) from the other businesses, and this may have some potential to unlock value. All in all, the future looks promising for the company.

The stock now trades at 35x trailing earnings and at about 22x based on our estimated earnings for FY28. The valuation is not expensive per se, given the growth opportunity. However, considering the prevailing macro pressure on equities and the inherent cyclicality of the auto sector, we believe there is a good case for risk-averse investors to pocket some of the gains and retain the rest to participate in any future upside that may be left in the stock.

Before proceeding, here’s a refresher on Pricol’s business. The company has three verticals namely, driver information and connected vehicle solutions (DICVS); actuation, control and fluid management systems (ACFMS); and the recently acquired precision products vertical (P3L or polymer business). The three verticals account for roughly 60, 20 and 20 per cent of revenue. Under DICVS, the company manufactures LCD and TFT-based instrument clusters, fuel level sensors and telematics. Under ACFMS, it manufactures oil, fuel and coolant pumps, disc brakes and handlebar parts such as switches, brake/clutch levers. Under P3L, it manufactures engineered plastic parts that find use in body panels and dashboards among others.

Pricol reported strong revenue and profit growth of around 50 per cent each in FY26. Three-year compounded growth (between FY23 and FY26) of revenue and profit work out to 27 per cent and 35 per cent, respectively. As the effect of the acquisition faded, revenue and profit growth moderated to 23 per cent and 35 per cent in Q1 FY27 — which is still strong. Though Q1 EBITDA margin appears to be in line with that in FY26, management revealed that it came under pressure.

The West Asia crisis led to a spike in input costs, particularly for polymers, LPG and freight. The ongoing AI mania sent prices of chips and child parts used in instrument clusters soaring. Given the higher scale of operations in the quarter, management admitted the lost opportunity of achieving EBITDA margin of up to 2 percentage points more than what was reported. This may be the case in FY27, as long as the supply crunch prevails. However, a part of this inflation is recoverable from OEM customers. Further, Pricol had tied up with Hong Kong-based BOE Varitronix to backward integrate the production of TFT backlight modules. The production of these modules will likely begin towards the end of FY27 and aid margin from FY28.

Over the last two years, Pricol has won orders to supply instrument clusters and other parts for some of the best-selling models. These include Tata’s Sierra, Punch, Tiago and Altroz, TVS’ Jupiter, Ntorq and iQube, Suzuki’s Access, Bajaj’s Chetak, 3-wheelers and its Pulsar range.

Since acquiring the polymer business from the TVS group, which largely served the TVS Motor Company, Pricol has onboarded new customers including Ather, River, Raptee, Simple Energy, Honda and Royal Enfield, with a Yamaha deal in closing stages. However, that business is currently constrained by capacity . This has even led to the company turning down a few deals that came its way. Along with a capex allocation of ₹300 crore for DICVS and ACFMS verticals, it has allocated ₹400 crore for the P3L vertical. This ₹700-crore capex is expected to be incurred over the next 18-24 months. Once completed, management expect the P3L vertical should be capable of generating a maximum revenue of ₹2,000 crore a year, from about ₹870 crore in FY26.

Revenue from the fairly new disc brakes and switches under ACFMS is expected to ramp up from FY28. Pricol currently supplies disc brakes to an Indian OEM, though.

Overall, the management is upbeat on outgrowing the underlying auto market and is looking to double revenue to ₹8,000 crore by FY31.

In late June, Pricol’s board approved the spin-off of the DICVS vertical into ‘Pricol Autotech’. Shareholders will receive one share of Pricol Autotech for every share in Pricol. Key stages such as approval of NCLT and shareholders are pending. The demerger is expected to be complete in the next four quarters.

Today, the instrument cluster is a rapidly evolving product. It now integrates entertainment, navigation, over-the-air updates and climate control besides vehicle information. A three-screen ‘coast-to-coast’ setup is a common sight these days. Though Pricol is capable of manufacturing such ‘e-cockpits’, market leaders such as Continental, Nippon Seiki and Visteon operate on an exponentially higher scale. This limits Pricol’s ability to procure child parts cheaply. The management believes the demerger can help onboard tech partners who can also share business with Pricol alongside other benefits such as focused decision-making, capital allocation and value unlocking.