Gabriel India Ltd. share price target

the back of strong auto sales in most of its underlying industries. The company having earning about 83% of revenues from the auto OEM segment is a major supplier to all the OEMs across India. It boasts of 77% market share in the CV industry, while ~30% in the PV segment and ~25% in the two wheeler segment. Technical collaborations with KONI,...

Gabriel India reported Total revenues of Rs 394 cr (5% YoY & 6%QoQ), the EBIDTA stood at Rs 38 cr (4% annually & 10% QoQ) with EBIDTA margin at 9.5% (expansion of 77 bps (YoY). Reported net profit stood at Rs 21.3 cr (10% YoY & 10% QoQ).

Revenue Remains Stable, Profitability Margins Improved: Gabriel India Ltds during Q2FY17 has registered a steady growth in its operating revenue of 5.0% (YoY) to Rs. 3,938 mn, whereas it has seen an increase of 6.3%(QoQ). The share of passenger vehicle segment in the Q2 revenue has increased to 31.0% as against 28.0% in the same corresponding quarter last year.

Gabriel India Ltd’s operating revenue has registered a steady growth in its operating revenue (YoY) of 8.3% to Rs 3,704 mn, whereas it has seen an increase of 1.1% (QoQ). The company has witnessed an increase in volumes in passenger vehicle segment compared to the same quarter of its last year (32.0% Vs 27.0%) led by the likes of its some customer products, whereas the share of its 2/3 wheeler segment (56.0% Vs 60.0%) has decreased because of the lower off-take from 2 of its customers and share of commercial vehicles segment stood at 12.0% Vs 13.0% of its revenue. We introduce FY18E earnings and expect the company to register stable operating revenue at CAGR of over 10.4% during FY16-FY18E on the back of expected improvement in the economy and expected reforms at the macro-economic level leading to the increased customer demand.

Valuation: They introduce FY18E earnings and reiterate our “BUY” on Gabriel India valuing it at 20.0x of its FY18E EPS of Rs 7.1, which is ~1 Standard deviation from its mean forward P/E multiple over its 5 years and also was the average forward P/E multiple in the last 2 years to arrive at a target price of Rs. 144.

Exposure to fastest growing OEM's like HMSI, RE and TVS to help outperform industry: GIL continues to growth momentum across all segments with revenues growing at a CAGR of 16% (auto ancillary industry CAGR 11%) through FY10-FY15. 2W/3W segment contributes ~63% to GIL's revenue. Indian 2W/3W industry has grown at CAGR of 12% through FY10-FY15. HMCL and BAL have own subsidiaries Munjal Showa and Endurance respectively sourcing most of their requirement internally. Overall outperformance of GIL is attributed to fast growing HMSI, RE, TVS, Yamaha and Suzuki with industry excluding HMCL and BAL growing at a CAGR of 20% through FY10-FY15. HMSI, RE, TVSL and Yamaha, the key OEM's (~52% of FY15 top-line) are lined up...

Gabriel India Ltd posted net revenue of Rs. 3484Mn in Q4FY15 lower than that of the previous quarter by 3%. The annual revenue of FY15 stands at Rs.14441Mn which surged by 12% as compared to that of the previous year revenue of Rs. 12866Mn. EBITDA annually increased by 29% in FY15 to Rs. 1164Mn and decreased by 1.4% in Q4FY15 QoQ to Rs. 284Mn. The EBITDA margins improved to 8.1% in FY15 from 7% in FY14.. Depreciation has decreased QoQ in Q4FY15 by 2% and has risen by 15% in FY15 compared to that of the previous year FY14. Finance costs have declined by 39% in FY15 as compared to that of previous year FY14. Further, the same remains flattish between the quarters Q4FY15 and Q3FY15.

Gabriel India Ltd's operating revenue has registered a steady growth in its operating revenue (yoy) of 5.9% to Rs 3,595 mn, whereas it has seen a decline of 6.5% (qoq). However this has come a little lower than our estimates. EBITDA has registered a significant growth of 25.1% to Rs 288 mn (yoy), whereas it has contracted by 6.9% (qoq).

A proven leader in the shock absorbers and front forks segment in the country with strong balance sheet and free cash flows with a 'BUY' rating valuing at 16.3xFY17E EPS for target of Rs 142.