Sharekhan Bets On The Stock Of Gabriel India To Buy, Profit Rallies By 47% YoY

Top brokerage firm Sharekhan has given a buy rating to the stock of Gabriel India Ltd. The company's EBITDA and PAT increased by 37.4% YoY and 46.7% YoY to Rs. 59 crore and Rs. 37 crore, respectively. Exports grew by 15.1% YoY to Rs. 25.1 crore in Q2 FY23, despite geopolitical tensions.

Stock To Buy: Target Price

The Current Market Price (CMP) of Gabriel India Ltd. is around Rs. 177. Sharekhan has estimated a Target Price for the stock at Rs. 217. This stock has the potential to give a 22.59% return, in the upcoming 12 months. This small-cap stock has a market capitalization of Rs. 2,590 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 177
97Target Price	Rs. 217
Potential Upside	22.59%
52-week high share price	Rs. 186.40
52-week low share price	Rs. 102

Q2FY23 financials

Gabriel India Limited's (Gabriel's) Q2FY2023 results were broadly in-line with estimates. Revenue, EBITDA, and PAT grew by 36.1% y-o-y, 37.4% y-o-y, and 46.7% y-o-y, respectively. Net revenue rose by 36.1% y-o-y and 11.4% q-o-q to Rs. 803 crore, driven by strong PV, CV, and aftermarket sales. EBITDA margin expanded by 30 bps q-o-q to 7.4% in Q2FY2023, led by softening commodity prices, improved product mix, and cost reduction.

Why should you buy this stock?

Sharekhan mentioned, "We continue to maintain our positive view on the company, as we expect the company to continue to outpace the industry's growth, given its dominant position in suspension components, new launches in automotive segments, and increased electric vehicle (EV) adoption in India. Gabriel is benefitting from its first-mover advantage in the EV segment, which has helped it to gain market leadership across the electric 2W and 3W automotive segments. Management is optimistic about the growth outlook, led by increasing EV adoption in 2W, 3W, PV, and bus segments and shifting consumer trends towards the SUV segment."

EBITDA margin & CAGR expected to boom

Management expects EBITDA margin to gradually revert to double digits, aided by softening commodity prices and improving product mix. Based on the company's well-thought and workable strategies and its inherent capabilities, we expect Gabriel's net earnings to post a 42.8% CAGR over FY2022E-FY2024E, driven by an 18.3% revenue CAGR and a 220-bps expansion in EBITDA margin to 8.5% in FY2024E from 6.3% in FY2022.

Stock valuation

Sharekhan believe Gabriel's business performance will continue to outperform the industry, driven by its leadership position and preparedness to benefit from faster EV adoption. The stock is available at attractive valuations of 13.9x P/E multiple and 8.3x EV/EBITDA multiple its FY2024E. We maintain our Buy rating on Gabriel with a revised target price of Rs. 217, led by robust automotive demand, its preparedness to benefit from the adoption of EVs in India, and rolling forward target multiple to December 2024E EPS.

Disclaimer

The above stock was 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.