Sharekhan Bets On This Auto Stock For Good Long Term Gains

Sharekhan is betting on the auto stock Gabriel India for good gains. The brokerage sees the price rallying from levels of Rs 143 to Rs 173.

Well positioned in the electric vehicle space

According to Sharekhan the company is is well positioned to benefit from the rising penetration of EVs, especially in 2W and 3W segments, where the company has developed strong relationships with leading and promising companies.

"Gabriel India is developing products for electric vehicle OEMs such as OLA Electric, Okinawa, Ather Energy, TVs among e-2W OEMs, and Bajaj Auto, M&M, Tube Investment of India among e-3W OEMs. Gabriel is a sole supplier to Ola Electric for suspension components in India, which promises to be a strong electric vehicle player in 2W space," the brokerage has said.

Valuations of Gabriel India

Sharekhan says that it remains positive on Gabriel, owing to its leadership position and brand recall in the suspension components of the domestic automotive industry and a key beneficiary of improving automotive demand.

"Based on the company's well thought and workable strategies and its inherent capabilities, we expect Gabriel's net earnings to post a 52.9% CAGR over FY2021E-FY2023E, driven by a 17.3% revenue CAGR during FY2021EFY2023E and a 250 basis points rise in EBITDA margin at 8.8%. We retain our buy rating on the stock," the brokerage has said.

Key risk for the stock

Riding on strong relationships with large OEMs and acquisition of new clients, the company continues to increase and maintain its market share across segments, with 25% market share in 2W&3W segment, 21% in PV segment and a 75% market share in the CV segment, including aftermarket sales.

"The third wave of COVID-19 can lead to slowdown in economic activities again and can impact the company's revenue growth. Also, the pricing pressures from automotive OEM customers can impact profitability," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.