Mandatory ABS Regulation And Digitalization Will Expand Global Two-Wheeler Markets

Key Takeaways

• Expansion into regulatory-driven and higher-margin electronic product lines positions Pricol for robust revenue and margin growth across domestic and export markets.
  
• Strategic partnerships, operational efficiencies, and diversification efforts increase resilience and drive sustainable long-term earnings.
  
• Overdependence on core automotive segments, supply chain vulnerabilities, and limited export diversification expose Pricol to revenue, margin, and innovation growth risks.

Catalysts

Manufactures and sells instrument clusters and other allied automobile components to original equipment manufacturers and replacement markets in India and internationally.

• The upcoming mandatory ABS regulation for two-wheelers (including 100cc bikes) starting January 2026 significantly increases the addressable market for Pricol's disc brake and driver information solutions, likely boosting revenue growth meaningfully over the next few years.
  
• Increasing digitalization and adoption of connected vehicle technologies (e.g., telematics, smart cockpit, battery management systems) in India and emerging markets aligns with Pricol's investment in next-generation products, positioning the company to capture higher-margin, electronics-driven revenue streams and improve overall net margins.
  
• The technology licensing agreement with an Italian firm for control systems, in combination with ongoing product launches for premium handlebar electronics, is expected to expand Pricol's value-add per vehicle and enable import substitution, driving both top line and long-term EBITDA margin enhancement.
  
• Pricol's diversification of revenues through export expansion-especially in the actuation control and fluid management segment with marquee customers in Europe and the U.S.-provides a catalyst for revenue stability and insulates earnings from potential downturns in the domestic auto market.
  
• Continued investments in R&D, vertical integration (including backward integration/localization of displays), and operational efficiency initiatives are set to enhance gross and EBITDA margins over time, supporting sustainable earnings growth.

Pricol Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Pricol's revenue will grow by 19.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.8% today to 7.1% in 3 years time.
• Analysts expect earnings to reach ₹3.6 billion (and earnings per share of ₹26.24) by about September 2028, up from ₹1.7 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.1x on those 2028 earnings, down from 34.8x today. This future PE is lower than the current PE for the IN Auto Components industry at 29.3x.
• Analysts expect the number of shares outstanding to grow by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.3%, as per the Simply Wall St company report.

Pricol Future Earnings Per Share Growth

Risks

• Heavy dependence on the 2-wheeler segment (65% of revenue) exposes Pricol to stagnation or decline in entry-level and two-wheeler demand due to urban mobility changes or shifting consumer preferences, which could directly impact topline revenue growth.
  
• Ongoing supply chain risks such as continued reliance on China for key inputs like rare earth magnets and displays create vulnerability to geopolitical disruptions and commodity shortages, potentially resulting in lost sales, higher costs, and margin compression.
  
• Lack of clear visibility or guidance on timelines and magnitude for ramp-up of new product lines (smart cockpit, BMS, disc brakes) and integration of acquisitions raises concerns about Pricol's pace of innovation and ability to meaningfully increase their net margins over the long-term.
  
• Intense competition and low barriers to entry in segments such as plastic molding and handlebar components, with many new players and established competitors, could place downward pressure on pricing and margins, impacting Pricol's earnings sustainability.
  
• Low current export contribution (7–8% of sales) and ongoing reliance on domestic Indian OEMs heighten Pricol's exposure to potential local industry slowdowns, regulatory changes, or economic shocks, introducing earnings volatility and limiting revenue scalability.

Valuation

• The analysts have a consensus price target of ₹575.0 for Pricol based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹50.9 billion, earnings will come to ₹3.6 billion, and it would be trading on a PE ratio of 29.1x, assuming you use a discount rate of 14.3%.
• Given the current share price of ₹489.75, the analyst price target of ₹575.0 is 14.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.