Buy Gabriel India Ltd For Target Rs.189 - Sushil Finance
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Robust market share and consistent growth from after-market:
The company has robust dominance in the domestic OEM market as well as replacement market. According to the recent investor presentation, Gabriel commands 25% of suspension components market in 2-Wheelers (2W) & 3-Wheelers (3W), 21% in Passenger Vehicles (PV) and 75% in Commercial Vehicles (CV). Further, the company has been leading the after-market for 6 decades with >40% market share.
New orders and new geographies to drive the top-line:
Gabriel has had longstanding technical tie-ups with global players, such as Yamaha Motor Hydraulic System Co Ltd, KYB Spain, and Kayaba Industry Co, etc. Now, the company is leveraging its relationships with global OEMs in India to penetrate their global operations – both OEM and Aftermarkets. During FY21, the company secured new entries in Europe in CV segment, in Russia in PV segment. Further, the company won several awards from key customers like HMSI, Honda, VECV and Toyota; commenced new businesses with existing customers in CV segment. During the last fiscal, the company had won an order from DAF Netherlands which they have further extended.
Strong fundamentals to steer the company on a growth path:
With the strong operating history of more than 60 years and a strong brand recall, the company has created a robust presence in the Indian automobile industry – in all the spheres and channels. From FY10 to FY19, the turnover grew at a CAGR of ~13% from Rs.692 cr to Rs.2,076 cr; the company is virtually a debt-free company and holds net cash of Rs.203 cr. Further, the company’s cash accruals are expected to remain healthy over the next two fiscals with stable cash flows.
OUTLOOK & VALUATION
Gabriel India is a leading manufacturer of shock absorbers and suspension related auto-components. The company belongs to Anand Group and has an operating history of more than 60 years. The company has strong dominance in Original Equipment Manufacturers (OEMs) as well as Aftermarket. The company is focused on leveraging its international tie-ups and long-lasting relationships with global leaders to grow its exports business. The company has recently got new orders from various customers in 2W, PV, and CV spaces. Further, the company has got breakthrough orders in the Electric Vehicles (EV) space. Going forward, we expect the company to deliver an EPS of Rs.8.6 in FY23; assigning a target multiple of 22x we arrive at a target price of Rs.189 showcasing an upside potential of 30.3% from current levels with an investment horizon of 18-24 months.
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