Anand Rathi Suggests Buying This Auto Component Stock For Over 20% Gains, EV Order Driving Growth

Stok Outlook

The Current Market Price (CMP) of the stock is Rs 114. Today, the stock gained 5.46%. It was opened at Rs 108.15. Investors can expect a gain of 21.05%. It has touched the 52 week low at Rs 102 on 12th May 2022, whereas, the 52 week high at Rs 168.15 on 13th October 2021. In the last one year, the stock has fallen more than 10%, on the other hand, in the last 1 week it has gained more than 6%.

For Gabriel India, consistent improvement in market share with key customers and large orders from the market leader in electric 2Ws were the highlights of the quarter. It continues to gain market share in Pvs on launches by OEMs, while new programs expected by H2 FY23 augur well for long term growth.

Best Quarterly Performance, EV order driving growth

According to the brokerage, "Despite supply-side constraints curbing automobile volumes, its Q4 FY22 revenue grew 18% y/y, 13% q/q, to Rs 6.8bn. Its Q4 OEM business was up 19% y/y, 17% q/q, to Rs5.8bn; for FY22, up 34% y/y to Rs18.9bn. Exports were down 29% y/y (flat q/q) to Rs205m on geopolitical tension (it supplies VW Russia); for FY22, up 37% y/y to ~Rs1bn. It continues to receive further orders from customers. It will be supplying to Maruti's new Jimny, Brezza and Alto, along with Stellantis. In CVs, it continues to dominate (an ~85% market share) and the expected upturn offers significant growth opportunities for the near to medium term. In EVs, it obtained a Rs2.5bn order from Hero Electric and expects SOPs to commence by end-Q2 FY23. It has an over 55% market share in 2W EVs and industry volumes are expected to reach 1m in FY23 itself, said management. This augurs well for its long-term growth; accordingly, we expect revenue to grow 14% in FY23 and 13% in FY24."

Brokerage expects better margin in FY23 and FY 24

"The Q4 FY22 margin contracted 142bps q/q to 5.5% on high commodity costs and freight charges. The under-recovery in RM would be passed on in subsequent quarters, said management. Also, its Core-90 cost-savings-program would help margin expansion. Hence, we expect margins of 7.6% in FY23 and 8% in FY24," the brokerage has said.

Brokerage's recommendation on the stock

The brokerage has said, "With good recovery anticipated in subsequent months, we expect automobile volumes to pick up considerably. We expect a 13% CAGR in revenue over FY22-24 and 26% earnings growth, leading to an EPS of Rs9.9. We upgrade our rating to a Buy, at a revised Target Price of Rs138 (14x FY24e)."

About The Company - Gabriel India Ltd

Gabriel India is part of ANAND Group. From being a single-product company in 1961, the company has transformed itself in line with changing market, technical and social trends and played a key role in limiting emissions of ride control products and fostering the cause of environmental protection. The company manufactures over 300 models of ride control products. Its products include shock absorbers, struts, front forks and others.