Hold Gabriel India; target of Rs 125: ICICI Direct
ICICI Direct recommended hold rating on Gabriel India with a target price of Rs 125 in its research report dated August 26, 2020.
August 26, 2020 / 09:36 PM IST
ICICI Direct's research report on Gabriel India
Gabriel India (GIL) is the market leader in the organised Indian automotive suspension segment with key products being shock absorbers, struts and front forks. It is also among the top 10 players globally with the aspiration of breaking into the top five club in the long term. It has a diversified presence across domestic segments with 2-W segment accounting for bulk of its sales at nearly 67% of revenues as of FY20. In the 2-W suspension product market it commands a market share of ~25% with top three clients being TVS Motors, Yamaha and Bajaj Auto. It is also a key supplier to 2-W EV players Ather Energy, Okinawa and Hero Electric among others.
Improving demand outlook leads to an upgrade in our estimates for GIL. We now expect sales, PAT to grow at a CAGR of 0.6%, -2.5%, respectively, in FY20-22E. GIL offers a play on the 2-W demand revival post Covid and possesses strong financials (debt free B/S, healthy cash flow generation, double digit return ratios). The recent run-up in stock price, however, limits our ability for rating upgrade. Consequently, we retain our HOLD rating on the stock, valuing it at Rs 125 i.e. 22x FY22E EPS of Rs 5.6.
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