Gabriel India Limited: Steering Ahead in the Auto Component Industry

Company Overview

Gabriel India Limited operates in diverse business segments, including two- and three-wheelers, passenger cars, commercial vehicles, railways, and the aftermarket sector. The company has a portfolio of over 500 designed products and serves all vehicle segments in India. Gabriel India's leadership in the aftermarket is supported by a network of more than 700 distributors and 20,000 retailers, ensuring its products are widely available across India and in over 30 countries across six continents. The company's vision is to be among the top 5 shock absorber manufacturers worldwide.

Historical Performance

• Revenue of INR 2,972 Cr in FY23, marking a 17% CAGR over the FY21-23 period
• New orders for axle dampers from DAF Netherlands and a 40% YoY growth in railway volumes in Q3 FY24
• EV revenue share at 5%, mirroring the 2W EV market penetration
• Exports saw a ~20% YoY drop, but efforts are ongoing to secure significant PV export orders

Key Drivers and Investment Thesis

• Strategic Alliances with Market Leaders: Gabriel India's client portfolio includes leaders in the ICE and EV sectors, with TVS ICE and M&M showing significant market share gains in Q3 FY24
• Significant Gains in EV Market Share: Gabriel India's clients, such as Ola Electric and TVS EV, have registered remarkable retail market share gains in the rapidly evolving EV sector
• Innovation at the Helm: Recent business wins, including contracts from TVS Motor, Suzuki, Ola Motorcycles, Tata Motors, and Maruti Suzuki, highlight Gabriel India's robust product innovation and industry trust
• Foundation of Excellence: Gabriel India's debt-free status, coupled with cash and investments of ~INR 400 Cr, positions it well for sustainable growth, supported by a history of positive cash flows and management's commitment to achieving 10-11% EBITDA margins
• On the Road to Remarkable Growth: The company's growth trajectory is supported by new orders from existing and new clients, aggressive product launch plans by key OEMs, strong performance in the railways segment, and the introduction of high-margin products like the FSD technology

Financial Analysis and Valuation

Based on our analysis, we project Gabriel India's FY26 EPS at INR 17.26 and assign a multiple of 25x. This results in a target price of INR 431, implying a 23% upside potential within the next 18 months.

Recommendation

We recommend a "Buy" rating for Gabriel India Limited, considering its strong market position, strategic alliances, and growth prospects in the auto component industry. The company's focus on innovation, diversified product portfolio, and robust aftermarket network, coupled with its solid financial performance, makes it an attractive investment opportunity.