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Gabriel India reported an inline performance during the quarter. Revenue during quarter stood at Rs.10.27bn grew by 18.8% YoY/+8.5% QoQ (vs CEBPL est. of Rs.9.94bn) led by strong growth in 2&3W segment which was offset by de-growth in PV and CV segment. Gross margin expanded to 26.0% by 124bps YoY /+ 18bps QoQ. EBIDTA during the quarter increased by 33.7% YoY to Rs.987mn and margin for the quarter jumped by 107bps YoY/3bps QoQ to 9.61%. PAT increased by 35.5% YoY to Rs.629mn. Company started sunroof production in Q4FY24 with current run rate of 12000 units/month and expected to reach peak capacity by FY26. Supply to KIA will start in January 2025, with the first line dedicated to Hyundai started from Jan-24

* 2W Segment and Export to drive growth: Going forward the 2W segment to be the major growth driver for the company with the PV and CV segments to remain muted. The 2W segment contributed to 65% of the revenue during the quarter with the market share of the company at 30%. The exports during the quarter were better compared to Q1 led by growth LATM and Europe region. Company expects export for Q3 to be better than Q2 led by better export volumes from Bajaj.

* Diversification into Sunroof to reduce single product dependency: GIL has a leadership position in the suspension systems, supplying and catering to all segments such as 2W, 3W, PV, CV, and railways and is also having support from parent Anand Group. In order to foray into a new edge product which is agnostic to power terrain technology and healthy growth prospectus, GIL has forayed into Sunroof system. Demand for sunroofs remains robust. The price difference between panoramic and normal sunroofs is almost double and current import content is 50%. The company has technical collaboration and alliance with Inalfa Roof Systems for manufacturing sunroofs in the domestic automotive market. The company is clocking a production of 12000 units/month currently supplying sunroof for the Creta and Alcazar models.

Outlook & Valuation: We have positive view on the stock supported by: 1) the key beneficiary of increasing demand from SUV category; 2) foray into high growth and power terrain technology agnostic product like sunroof system (content per vehicle is 5-6x of shock absorber); 3) scaling up the technological capabilities; 4) steady revenue visibility in the aftermarket (export leading the show); and 5) winning new orders from E-2W OEM and expanding capacity. We rate the GIL with BUY rating with a TP of Rs.529, based on 23x on Sep-FY27E EPS.

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