Healthy PAT growth amid double digit margins in sight
About the stock: Gabriel India (GIL) is a global top-10 shock absorber manufacturer serving 2-W, 3-W, PV, CV, railway and aftermarket segments.
• FY24 revenue mix – ~61% 2-W/3-W, ~25% PV, ~12% CV & railways
• FY24 Channel mix – 86% OEM; 11% Replacement market; 3% Exports
Q4FY24 Results: Reports robust numbers: On standalone basis, net sales for the quarter came in at ₹ 859 crore, up 17% YoY. EBITDA in Q4FY24 stood at ₹78 crore with EBITDA margins at 9%, up 40 bps QoQ. Consequently, PAT came in at ₹53 crores up 56% YoY and 23% QoQ. For full year, topline stood at ₹ 3,343 crore (up 12.5% YoY), EBITDA came in at ₹ 291 crore (margins at 8.7%, up 150 bps YoY) and PAT stood at ₹ 185 crore (up 40% YoY). GIL generated healthy positive CFO & FCF.
Investment Rationale: Remains broadly unchanged
• 2-W space to outperform auto industry in FY25, Gabriel a key beneficiary Domestic auto industry has witnessed a remarkable recovery over the past two years with PV space already surpassing its pre-Covid highs and CV space in close proximity of its earlier peak. Volume recovery in 2-W space however has been lacklustre and is still below its pre-Covid highs. The recent prints however in the 2-W space are very encouraging with Q1FY25 volumes up ~20% on YoY basis. On high base industry commentary is cautious on the growth prospects in PV & CV space for FY25E, with 2-W emerging as a sole shining star and expected to outperform the industry going forward, driven by both revival in domestic demand & bottoming out of export volumes. Gabriel with ~30%+ market share in this segment is expected to be a key beneficiary. In addition, Gabriel has leading ~70% market share in Electric-2W space thereby offering a unique moat which shall ensure growth longevity amid government’s thrust on EV’s.
• Healthy presence in SUV space, augmented by sunroof segment addition Gabriel has ~23% market share in PV space and realises healthy ~25% of its sales from this category. Interestingly, within PV space, GIL realizes ~64% of sales from the SUV sub-segment which is witnessing healthy demand traction with its domestic market share in SUV domain pegged at ~35%. Also notably, with aim to expand its presence in top selling SUV space & to catch up on premiumization trend, GIL has entered into JV with Inalfa for manufacturing of sunroof system & related components for OEMs in India. Increasing share of PV-SUV space in overall sales pie & presence in premium products like sunroof is structurally positive for Gabriel India.
Rating and Target Price
• We maintain our BUY rating on Gabriel India led by double digit margin guidance in medium term, ambition to grow ahead of industry, presence with top EV players such as Ola Electric, healthy RoCE profile (20%+) and cash positive B/S. We expect Sales/PAT at GIL to grow at 9%/24% CAGR over FY24-26E. We value Gabriel India at ₹600 i.e. 30x P/E on FY26E
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