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CMP: ₹137.8
Target: ₹188
Gabriel India Ltd (GIL) is the flagship company of Anand Group, offering the widest range of ride control products including shock absorbers, struts, and front forks.
Gabriel’s profitability was hit by high cost despite strong growth. GIL is investing in aftermarket and export businesses, driving up the cost, which is weighing on the profitability. In addition, the company has increased its research and development expenses to focus on new product introduction and GIL has also increased employee in R&D division.
GIL registered robust growth in 3QFY18 led by about 20 per cent growth in two wheelers and three wheelers, 12 per cent in passenger vehicle and nearly 49 per cent in commercial vehicle (including Railways business).
Valuation: We believe GIL will continue to gain share of business from its key customers as most of its key customers are outperforming the industry. Aftermarket and exports are expected to recover after a slowdown. We are positive on the growth and profitability prospects of the company.
Risks: Increase in raw material cost; unfavourable currency movement; a slowdown in the automobile industry and slowdown in export markets.
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