
Elara Securities has upped its target price on Gabriel India Ltd to Rs 1,115, a 67 per cent surge over its previous target of Rs 666, as it said the auto ancillary company is transitioning to a multi-product company. The fresh target comes following the composite scheme of arrangement, involving Gabriel India, Asia Investments Pvt Ltd (AIPL), and Anchemco India Pvt Ltd (Anchemco). Gabriel India shares rose 20 per cent today.
Emkay said the scheme would result into vesting AIPL’s automotive business undertaking, comprising Anchemco’s business and investments in Dana Anand India, Henkel ANAND India and ANAND CY Myutec Automotive into Gabriel India.
The deal is seen EPS-accretive by 41 per cent on FY25 financials, which is a positive.
"While all approvals are likely to be completed in the next 10-12 months, we have not yet factored this into our estimates. However, proforma, our FY27E and FY28E EPS is likely to increase by 36 per cent and 33 per cent, respectively, assuming a modest ~8-10% CAGR in profits for the acquired entities," Elara Securities said.
The brokerage called Gabriel India as one of its top picks. Its target price on the stock suggests 32 per cent potential upside over its Tuesday's closing price. Following the development, shares of Gabriel India climbed 20 per cent upper circuit to hit Rs 1,011.45 level. This was in addition to 19.99 per cent rise in the previous session. With this, the stock is up 88 per cent in the past seven trading sessions.
"In our view, the greatest potential for re-rating for any auto ancillary company arises from transition from a single- to a multi-product portfolio. Auto ancillaries have outperformed OEMs in the past decade on four key counts: a) increasing products, b) expansion in segments, c) expansion in geographies and d) inorganic expansion. Gabriel India is a play on all four," Elara said.
While all approvals are expected within the next 10–12 months, Elara has not yet incorporated them into its estimates.
However, on a proforma basis, FY27E and FY28E EPS estimates for Gabriel India have been raised from Rs 22.80/26.60 to Rs 31/35.30, assuming an 8–10 per cent profit CAGR for the acquired entities.
"The target multiple on proforma financials is ~35x (in line with Endurance on FY27E), reflecting expectations of continued diversification. The FY25–27E EPS CAGR on a proforma basis is estimated at 45 per cent. We maintain our Buy rating and raise the target price to Rs 1,115. Our current EPS forecast includes Gabriel’s 49% stake in the sunroof JV," Elara said.