EV Adoption Will Diminish Revenue Despite Niche Opportunities

Key Takeaways

• Increasing EV adoption and regulatory changes reduce demand for Gabriel India's traditional products, posing significant long-term revenue and growth risks.
  
• Supply chain disruptions, client concentration, and slow diversification threaten operating margins, earnings stability, and future market positioning amidst intensifying competition.
  
• Gabriel India's growth strategy relies on market diversification, operational efficiency, product innovation, and increasing exports to reduce cyclical risk and drive sustained revenue expansion.

Catalysts

Manufactures and sells of ride control products to the automotive industry in India, the Netherlands, and internationally.

• The continued acceleration of electric vehicle (EV) adoption globally and within India threatens Gabriel India's core revenue streams, as EVs require fewer and less complex suspension and shock absorber components; this poses a significant long-term risk of revenue stagnation and eventual decline as the market for traditional products shrinks over time.
  
• Intensifying regulatory focus on sustainability, circular economy measures, and the promotion of shared/public mobility could structurally reduce new vehicle sales in India, directly limiting Gabriel India's addressable market and severely capping future topline growth potential.
  
• Persistent and unpredictable supply chain disruptions, elevated global input costs, and persistent commodity inflation could erode Gabriel India's operating margins, especially as automotive original equipment manufacturers (OEMs) wield increasing bargaining power to resist price hikes, resulting in prolonged margin compression and weaker earnings.
  
• High client concentration remains a glaring vulnerability, as Gabriel India remains reliant on several large OEM contracts; any adverse change in these relationships or OEMs internalizing production could amplify revenue volatility and sharply disrupt both short-term and long-term earnings visibility.
  
• Progress in diversifying into high-value export markets and advanced technology segments (such as smart suspensions for EVs) appears limited, risking Gabriel India falling behind both local consolidation trends and large, global mega-suppliers, which could result in loss of market share, lower pricing power, and shrinking net margins as industry competition intensifies.

Gabriel India Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Gabriel India compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Gabriel India's revenue will grow by 7.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 6.0% today to 21.4% in 3 years time.
• The bearish analysts expect earnings to reach ₹10.8 billion (and earnings per share of ₹49.74) by about July 2028, up from ₹2.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.7x on those 2028 earnings, down from 57.7x today. This future PE is lower than the current PE for the IN Auto Components industry at 31.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.84%, as per the Simply Wall St company report.

Gabriel India Future Earnings Per Share Growth

Risks

• Gabriel India is diversifying into new high-growth markets such as solar dampers, sunroofs, and e-bike components, which are expected to drive significant incremental revenue over the next several years and reduce reliance on traditional automotive segments, supporting robust top-line expansion.
  
• Increasing localization and efficiency initiatives, such as the Core 90 program and process automation, are driving sustained improvements in operating margins, which should translate into consistent growth in EBITDA and net earnings.
  
• The company is leveraging inorganic acquisitions and new product introductions, such as the Marelli asset acquisition and planned product line expansions, to accelerate revenue growth and capitalize on emerging opportunities in both domestic and international markets.
  
• Gabriel India is deepening OEM and export relationships, with the sunroof and solar damper businesses providing access to new customer bases and export channels, increasing revenue diversification and reducing earnings volatility tied to the domestic auto cycle.
  
• Secular trends such as rising personal mobility, increased preference for premium and advanced suspension systems (e.g., inverted front forks in two-wheelers), and governmental infrastructure investments are expected to sustain volume and price growth in core segments, driving overall revenue and margin improvement for Gabriel India in the long term.

Valuation

• The assumed bearish price target for Gabriel India is ₹445.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Gabriel India's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1400.0, and the most bearish reporting a price target of just ₹445.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₹50.4 billion, earnings will come to ₹10.8 billion, and it would be trading on a PE ratio of 8.7x, assuming you use a discount rate of 13.8%.
  
• Given the current share price of ₹984.35, the bearish analyst price target of ₹445.0 is 121.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.