Gabriel India: Driving Growth Across Segments

Gabriel India is poised for growth across various segments, including the Passenger Vehicle (PV), Commercial Vehicle (CV), Railway, and Sunroof business. With a target price of Rs 384, Sharekhan maintains a “Buy” rating on the stock. Here’s a comprehensive overview of the company’s progress and outlook:

Passenger Vehicle Segment: Customer Expansion

Gabriel India’s revenue contribution from the PV segment has increased to 24% (compared to 22% in FY23). This growth is attributed to the company’s focus on expanding its market share in the PV segment. Gabriel has been successful in securing new projects from customers, including notable programs for vehicles like Jimny and electric Citroen C3. While the company has a strong presence in the electric 2-wheeler space, it is actively working to expand into the electric car segment, which is expected to be content accretive, particularly with the rise of SUVs in the PV segment.

Commercial Vehicle Segment: Overseas Market Exploration

In the CV segment, Gabriel India maintains an 89% market share in India, contributing 13% to its revenue in Q1FY24 (up from 12% in Q4FY23). Leveraging its dominance in the domestic CV space, the company is now exploring opportunities to expand its presence in overseas CV markets. A significant breakthrough in international CV markets could result in a substantial increase in content per vehicle.

Railway Segment: Steady Progress

While Gabriel India has a presence in the railway segment, its focus has primarily been on the automotive business. Railway segment revenue contributes approximately 1% to the company’s topline. The management does not anticipate a significant immediate increase in revenue from the railway segment but is open to exploring opportunities in overseas railway markets.

Sunroof Business in Joint Ventures: On Track for Growth

Gabriel India’s joint venture (JV) for sunroof business is progressing well. The Indian sunroof market witnessed about one million units in 2022, with panoramic sunroofs having a 28% penetration rate. The JV is set to commence production by January 2024 and will initially cater to Hyundai Motor India and Kia. Gabriel India is also engaging with other leading PV players like M&M and MSIL for future business expansion. The company plans to invest Rs 60 crore in the JV business in FY24. Inalfa is expected to acquire a 51% stake in the company, subject to regulatory approvals.

Outlook and Valuation for Gabriel India

Sector View – Structural Demand in Place

The automobile sector is poised for growth, driven by pent-up demand across segments. While the PV and CV segments are performing well, the two-wheeler sector is relatively slower. Sequential improvement in M&HCV sales is expected, driven by rising e-commerce, agriculture, infrastructure, and mining activities. Exports present significant growth potential due to India’s cost-effective manufacturing, proximity to key markets, and its status as a major raw material producer, particularly steel.

Company Outlook – Beneficiary of Leadership Position

Gabriel India is expected to benefit from the increasing penetration of electric 2-wheelers and 3-wheelers in India, thanks to its strong brand, leadership, and technological edge. The company aims to expand its market share across segments, leveraging relationships with domestic and global OEMs. It boasts advanced suspension component technologies and is actively working on product innovations. Faster growth in the aftermarket and export segments is a key differentiator for Gabriel. The company aims to be among the top five global shock absorber manufacturers.

Valuation – Maintain Buy with a Revised PT of Rs. 384

Gabriel India continues to expand its customer base and increase wallet share with existing customers. Its leadership in the domestic CV segment has opened doors for overseas opportunities. With a dominant position in the electric 2-wheeler space, the company is looking to expand into electric cars, driving higher content per vehicle. Gabriel aims to derive 10% of its revenues from export markets in the coming years, up from the current 4%. The company remains open to inorganic growth opportunities. Sharekhan maintains a “Buy” rating with a revised target price of Rs 384, reflecting strong brand equity, market share expansion, profitability focus, content per vehicle growth, inorganic growth strategies, and a renewed export focus.

Summary:

Gabriel India’s diversified approach across segments, customer expansion strategies, and focus on sustainability position it for growth and value creation. Sharekhan’s “Buy” recommendation reflects confidence in the company’s ability to capitalize on emerging trends and drive profitability.

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