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Conference Call Highlights

* GIL posted yet another record quarterly turnover during Q1 FY23 driven by healthy rebound in volumes on the covid affected lower base of Q1 FY22 and share of new businesses.

* 2W/3W: Growth was primarily driven by improvement in market share with key customers, new products; market share stood at 30%. The top 3 customers are TVS Motors, Yamaha & Bajaj Auto. Recent launches were Raider and Jupiter 125 for TVS Motors, Y4, Y5 and J201 for Mahindra, R107 and CNG for Bajaj Auto and various programs for Ola, Ampere, Ather and Okinawa.

*  Passenger Cars (PC): Market share stood at 23%. The top 3 customers are Maruti Suzuki, Volkswagen, Mahindra & Mahindra. The company recorded several launches for Maruti & Stellantis and is developing for Volkswagen, Tata Motors, Mahindra & Mahindra and Stellantis

* Commercial Vehicles (CV): Continued with moderate growth reflecting in better production volumes by OEMs; market share stood at 89%. The top 3 customers are Tata Motors, Mahindra & Mahindra, Ashok Leyland.

* AfterMarket: Market share stood at >40% with 11 CFA Locations and above 700 dealer network along with over 20,000 retail outlets. The company achieved a top-line growth of over 50% YoY and recorded highest ever sale of Rs.98.4 cr in the segment

* Exports: 18% of the exports came from after-market; the exports turnover stood at Rs.21.8 cr as against Rs.27.6 cr in the corresponding quarter of previous fiscal and Rs.22.8 cr in the previous quarter

* GIL is doing extremely well on Electric Two Wheelers (E2W) front; the company has achieved a market share of 60% with nearly 85% growth in FY22 turnover over the preceding fiscal. The company is supplying to 5 out of top 6 selling models in the E2W space including Okinawa Praise, Ampere Magnus-ex, Ola S1 Pro, Ather 450x, and TVS iQube. The company is currently not supplying to number 3 model – Hero Optima. The penetration of E2W stood at around 4.5% at the country level but in Maharashtra it has reached ~13%

OUTLOOK & VALUATION

GIL is a leading manufacturer of shock absorbers & suspension related auto-components. The company belongs to Anand Group and has an operating history of more than 60 years. GIL has strong dominance in OEMs as well as aftermarket. The company is focused on leveraging its international tie-ups & long-lasting relationships with global leaders to grow its exports business. We expect GIL to deliver an EPS of Rs.8.7 in FY23; maintaining our previous multiple of 20x, we derive our target price of Rs.175 showcasing an upside potential of ~21% from current levels with an investment horizon of 12-18 months. Thus, we maintain our BUY rating for GIL.

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