Unique play on 2-W recovery and PV premiumization

Gabriel India (GIL) is a global top-10 shock absorber manufacturer serving 2-W, 3-W, PV, CV, railway and aftermarket segments. It realises ~61% of its sales from 2/3W segment & ~25% from PV space.

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 YTDFY25 volumes up ~16% 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.

Gabriel has ~23% market share in PV space. 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. Interestingly in this space, the company is already running at healthy 70%+ utilisation levels, realising ~14-15% EBITDA margins and will be substantially PAT positive this year.

We remain positive on Gabriel amidst healthy B/S, EV agnostic product profile, foray into sunroof components and presence with prominent new age auto OEMs in the EV space. Company remains committed to be amongst the top 5 shock absorber manufactures globally and aims to clock double digit EBITDA margin profile in near future.

We expect Sales/PAT at Gabriel India to grow at 9%/24% CAGR over FY24-26E. We have a BUY rating on the stock with a target price of ₹600 i.e. 30x P/E on FY26E