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Prabhudas Lilladher
Gabriel India (Accumulate)
CMP: ₹95.75
Target: ₹110
Gabriel India reported strong Q2FY15 results on account of higher operating leverage. Net sales grew by 21.2 per cent y-o-y to ₹384 crore (PL estimate: ₹376 crore) mainly aided by 30 per cent growth in 2/3 wheeler segment. On account of strong traction in topline and tight control over costs, operating profit margin expanded by 180 bps to 8 per cent. During the quarter, the company repaid its entire working capital debt of ₹41.9 crore, which helped bring down the interest cost by 70 per cent y-o-y. Recovery in commercial vehicle cycle could further accelerate the growth momentum as the utilisation is currently at 50 per cent. We expect revenues to grow at a compound annual growth rate (CAGR) of 17 per cent whereas earnings are likely to increase at a 34.1 per cent CAGR over FY14-FY17E period. The stock is currently trading at 15.4x FY16E and 12.0x FY17E EPS, which, in our view is attractive.
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