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Beat in operational performance; acquisitions to drive growth and diversification

* Gabriel India (GABR) reported 1QFY27 revenue of INR14.2b, up 15.5% YoY (broadly in line with estimates). Revenue growth was led by strong demand from 2W and PV segments. Note: Revenue includes Anchemco and Myutec from this quarter onward.

* EBITDA stood at INR1.2b (up 5% YoY), beating our estimates by 15%. EBITDA margin stood at 8.7% vs. 9.6% in 1QFY26 due to a surge in input costs on account of the West Asia crisis. We believe this will be gradually passed on to customers with some lag effect.

* Adjusted PAT, including the restructured entities (Dana, Henkel, Anchemco and Myutec) stood at INR1.0b (up 2% YoY), beating our estimates by 6%.

* The demand outlook remains healthy across all key segments in India, with sequential improvements in margins expected on account of the passthrough of input costs to customers gradually. We upgrade our FY28 EPS estimates by 15% (after considering dilution due to preferential issue) primarily on account of acquisitions. We reiterate our BUY rating on the stock with a revised TP of INR1,664 (based on ~40x FY28E EPS).

Valuation and view

* For nearly six decades, GABR has operated as a single-product suspension player, which inherently constrained its scalability. The company is now undergoing a structural transformation into a diversified mobility platform with a significantly larger growth runway. Over the past two years, management has adopted a more aggressive stance (the group aspires to scale revenue to INR500b by 2030), with plans to launch at least one new product annually and expand into adjacencies such as sunroofs, solar dampers, and e-mobility. While the Anand Group has historically diversified across multiple verticals through global partnerships, much of this value remained outside GABR. This is now changing, with the latter being positioned as the primary growth vehicle for the group, as evidenced by recent restructuring initiatives (integration of Dana and Henkel) and JVs (Enmove, Jinhap) being routed through the listed entity, with the proposed acquisition of stakes in HL Mando ANAND and HL Klemove further strengthening GABR’s portfolio across braking, steering, suspension and ADAS, and accelerating its transition into a diversified mobility platform. This should help consolidate the Group’s automotive component businesses under GABR and drive long-term shareholder wealth creation.

* The demand outlook remains healthy across all key segments in India, with sequential improvements in margins expected on account of the pass-through of input costs to customers gradually. We upgrade our FY28 EPS estimates by 15% (after considering dilution due to preferential issue) primarily on account of acquisitions and estimate an EPS CAGR of 16% for FY26-FY28E (FY26 nos are restated due to restructuring). Further group consolidation and selective inorganic opportunities could provide additional upside to earnings over the medium term. We reiterate our BUY rating on the stock with a revised TP of INR1,664 (based on ~40x FY28E EPS).

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