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Strategic acquisitions strengthen technology portfolio and growth visibility:

GABR delivered a healthy topline performance in Q1FY27, with standalone and consolidated revenue growing 18.9% YoY and 15.5% YoY, respectively, supported by a robust demand across the 2W, CV and aftermarket segments. However, EBITDA margin contracted to 8.4% on a standalone basis due to commodity cost inflation, reflecting continued pricing pressure. The key development in this quarter was the launch of Project Jupiter, under which GABR announced the acquisition of a 28.99% stake in HL Mando Anand and a strategic stake in HL Klemove India, significantly expanding its presence into braking, steering, ADAS and automotive electronics. We believe these acquisitions materially enhance GABR's technology capabilities, diversify its product portfolio and strengthen its long-term positioning in high-content mobility solutions

ADAS and new technology platforms to drive growth:

The acquisition of HL Klemove provides GABR with access to India's localised ADAS ecosystem, where the management estimates content per vehicle at INR 20,000–60,000. The company also continues to maintain a ~57% market share in electric twowheelers, while expanding exports and the aftermarket business. However, four things could continue to weigh on near-term margin and earnings visibility, despite significantly improving long-term growth prospects. These are -- temporary disruption in production of the sunroof business, commodity inflation, higher leverage to fund acquisitions and execution risks associated with integrating large businesses.

View and Valuation:

We have increased our FY27/28E EPS estimate by 11.0/9.7%, respectively, considering inorganic growth to be coming from recent acquisitions. We raise our P/E multiple to 32x (earlier: 28x) on FY28E EPS, mainly due to inorganic growth prospects and diversification in the product mix; accordingly, we increase our target price to INR 1,315. However, we maintain our ‘REDUCE’ rating on the stock, given the sharp rally in the stock price, which has left limited scope for upside. While the ongoing restructuring is a catalyst for FY27E growth, we believe this is fully priced in at the current level.

Q1FY27: Revenue in line, EBITDA and PAT below estimate

* Revenue was up 15.5% YoY and up 3.3% QoQ to INR 14,257 Mn (vs CIE est. of INR 14,124 Mn)

* EBITDA was up 5.0% YoY and down 6.8% QoQ to INR 1,242 Mn (vs CIE est. of INR 1,299 Mn). EBITDA margin was down 87 bps YoY and down 94 bps QoQ at 8.7% (vs CIE est. of 9.2%)

* APAT was up 2.0% YoY and down 9.2% QoQ to INR 1,074 Mn (vs CIE est. of INR 1,217 Mn)

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