Is Gabriel India a compelling buy?

I want to draw attention to Gabriel India. There is a research report of Karvy given when the stock was at Rs. 100. Today the stock is at Rs. 78.

The report looks good. So is the stock a better buy today?

Gabriel: Well positioned to benefit from the up-cycle in Auto sector

Market leader with strong presence across the segments: Gabriel is a
proven leader in the shock-absorbers and front forks segment in the country. It
has over 78% market share in commercial vehicles, 28% in passenger vehicles,
22% in 2/3 wheelers and over 51% in the after sales segment.

Valuation and Outlook

Gabriel’s expanding presence in new geographies along with higher expected
demand from domestic OEMs would result in higher growth in revenues whereas
higher growth in earnings and return ratios in the coming years. At CMP of Rs
100.7, the stock trades at 11.6x FY17E EPS, we initiate coverage on Gabriel with a
‘BUY’ recommendation and value at 16.3x FY17E EPS with a target price of Rs 142.

I have attached the Gabriel research report of Karvy for your perusal. Pls advice.

 

i hold stock in my portfolio buy @ 96 thinking to avg @ current level ,,,,fundamentals are stronge conses rating buy brokers buy tp near 140 will double your investment from current level.

 

I read this report in today's business line paper:

https://www.thehindubusinessline.com/markets/stock-markets/a-good-time-to-ride-on-gabriel-india/article7045763.ece?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication

Gabriel India: Buy
Parvatha Vardhini C
BL Research Bureau

Pick-up in automobile sector and the firm’s leadership in the market are positives

March 29, 2015: Investors can buy shares of Gabriel India to ride on the recovery in the automobile sector. The company manufactures ride-control products such as shock absorbers, struts and front forks and caters to bikes, scooters, three-wheelers, commercial vehicles and cars.

Gabriel is a tier I supplier to almost all manufacturers such as Maruti, Tata Motors, Ford, GM, Toyota, Volkswagen, M&M, Ashok Leyland, Honda, Bajaj, Yamaha and TVS. It has a market share of around 70 per cent in commercial vehicle supplies and 20-30 per cent in two-wheelers and cars.

The broader market volatility has seen the stock drop by over 25 per cent since it touched a one-year high of ₹107 in January 2015.

The fall offers an attractive entry point. At the current price of ₹78, Gabriel discounts its trailing 12-month earnings by around 20 times. This is much cheaper than many mid- and small-cap stocks, whose valuations have zoomed in the market rally of the past one year. The company’s market leadership and diversified clientele provide good visibility to earnings growth over the next two-three years. But considering that it is a small-cap stock (market capitalisation of ₹1,120 crore), investors are advised to take only limited exposure.

Recovery to help

After the slowdown of the past two-three years, overall auto sales in April 2014-February 2015 grew 8 per cent, compared with 3 per cent in fiscals 2013 and 2014.

Cooling inflation, growth in urban disposable incomes, and lower borrowing costs should boost car and bike sales. Besides, as industry recovers, the demand for goods carriage will also increase, pushing up truck sales too.

Gabriel’s presence across all segments of the auto industry is an added advantage. The company can focus on the segments that have the potential to grow faster than the rest. For instance, although overall volumes grew 8 per cent this year, medium and heavy truck sales rose 20 per cent, and those of scooters by 26 per cent.

Its after-market presence will also help improve realisations and margins.

Gabriel derives 10-15 per cent of its revenue from the demand to replace worn-out parts in existing vehicles. Considering that after-market sales bring in higher margins, new products such as radiator coolants, suspension bush kits and front fork oils have been added to aid sales.

Financial performance

For the nine months ended December 2014, net sales grew 15 per cent to ₹1,085 crore and net profit by 37.4 per cent, to ₹47 crore.

Operating margins came in at 8 per cent vis-à-vis 6.5 per cent a year ago. Interest costs came down by 42 per cent to ₹40.6 crore, thanks to an ongoing debt reduction initiative.

(This article was published on March 29, 2015)