Investor's Eye: Update - Gabriel India (Play on revival in auto sector; price target revised to Rs56)

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Investor's Eye [June 05, 2014]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE     Gabriel India Recommendation: Buy Price target: Rs56 Current market price: Rs46   Play on revival in auto sector; price target revised to Rs56    Key points  Gabriel India is a play on the revival of growth in the passenger vehicle and commercial vehicle segments as it is likely to be an early beneficiary of the expected pick-up in the economy going ahead. We are also enthused by the signals coming from the new government including the media reports about its plans to provide incentives for heavy vehicles used for public transport services. A revival of revenue growth coupled with an expansion in the margin resulting from operating leverage (higher capacity utilisation) and a favourable revenue mix is expected to lead to an exponential growth in the earnings over the next two years. This will improve the return ratios and aid the re-rating of the stock. Despite a 41% appreciation in the stock in less than two months since we initiated coverage on it (on April 16, 2014), the valuation is still comfortable at close to 7.4x FY2016 estimated earnings. Thus, we retain our Buy rating on the stock but revise its price target to Rs56. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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