Banco Products vs Gabriel India

Banco Products vs Gabriel India: Cars are very complex machines that require hundreds or thousands of parts that must be assembled almost perfectly for the machine to run smoothly. Automakers don’t go through the headache of manufacturing these components and instead focus on designing these machines.

The demand for cars in India is one of the highest. This growth in automobiles secretly led to the growth of basic industries. With this in mind, we decided to cover two companies that manufacture auto parts.

Banco Products Vs Gabriel India Company Overview

Banco Products and Gabriel India increased shareholder wealth by more than 210% and 130% in just one year. Today we will find out what these companies manufacture and what markets they target. We will then analyze these companies financially, compare their profitability and revenue against each other and conclude which stock is better to bet on. So stay till the end and find out.

banco products

Founded in 1961, Banco Products is a pioneer in the engine cooling systems business, including charge air coolers, fuel coolers, oil coolers and AC condensers. We also manufacture deaerated plastic tanks, metal layer gaskets, and elastomeric molded gaskets used for static sealing.

In the automotive segment, Banco supplies passenger cars, two-wheelers, three-wheelers, utility and commercial vehicles. In the industrial segment, the company supplies material handling machinery, railway traction locomotives, transformer chillers and mobile compressors.

Owing to 50 years of industry experience and proprietary design and FEA simulation software, the company is a reputed supplier to OEMs such as Tata, Cummins, CAT, SAME and Mahindra.

In the aftermarket category, the company supplies products under the following names: banco and NRF. Banco acquired a 100% stake in Nederlandse Radiateuren Fabriek (NRF) in 2010. NRF is a leading manufacturer of automotive, industrial, railway and marine heat transfer products in European countries.

Gabriel India

Gabriel India Ltd is a leading auto ancillary company of the ANAND group engaged in the automotive and hospitality sectors. The company’s history dates back to the 1950s when its founder, Deep C. Anand, began his career as a plant manager at a Mahindra plant in 1954.

The company was founded in collaboration with Maremont Corporation (now Gabriel Ride Control Products, USA). Gabriel India has 60 years of experience in providing suspension solutions to automobiles from two-wheelers to railways.

Our customers range from the commercial and private vehicle sectors, from Indian Railways to Ashok Leyland, Force Motors, Mahindra & Tata Motors. The company enjoys partnerships with international brands such as KYB Corporation, Yamaha and Koni, which provide the necessary technology or appropriate supplies to manufacture its products.

Gabriel India dominates the domestic market with a commanding market share of 40% through a network of over 700 dealers and over 20,000 retailers. The company counts automotive OEMs as its customers and benefits from long-term contracts with these customers, reducing the cost of acquiring new customers.

Industry Overview

According to the Automotive Component Manufacturers Association (ACMA), India’s component exports are expected to reach $30 billion by 2026. It is also estimated that industry sales will reach $200 billion by the same year. The industry is expected to grow by 20-23%, driven by strong international demand and a resurgence in the domestic OEM aftermarket segment.

The parts industry directly benefits from a key automotive sector that is rapidly transitioning towards sustainability. The industry is innovating as various vehicle types, including electric, hybrid electric, and natural gas, gain traction.

The Indian automobile sector has emerged as the world’s third-largest market, overtaking Japan, with 4.25 million vehicles sold in 2022, according to the Society of Indian Automobile Manufacturers (SIAM). The growth of this sector is due to the following factors: Disposable income, credit availability and financing options, and population growth.

Banco Products vs Gabriel India – finance

Sales and Net Profit

Banco Products reported revenue of Rs. 2348 Cr in FY23, up 20% from Rs. 1963 in FY22. Gabriel performed even better with revenue expansion of over 27% at Rs. 2358 Cr in FY22 to Rs. 2,989Cr in FY23. However, Gabriel India’s somewhat inconsistent performance led Banco to perform at a higher rate.

In terms of net profit, Banco products performed impressively, expanding profits from Rs. 152 Cr in FY22 to Rs. 236 Cr in FY23, a growth of 55%. Gabriel’s net profit grew at a slightly slower pace of 48% from Rs. 90 Cr in FY22 to Rs. 132 Cr in FY23.

Banco’s net profit has grown at a CAGR of 36% since FY19, while Gabriel’s profit has grown by 8.65%. This shows that while Banco continued to grow, Gabriel’s profitability deteriorated in FY20 and FY21.

profit

Regarding operating margins, Banco Products reported a margin of 15.61% in FY23, while Gabriel recorded 7.19%. Banco’s operating margins have consistently performed in the double-digit category, with Gabriel delivering over 8.5% in FY19.

When it comes to net profit margin, the picture remains largely the same with Banco Products maintaining a margin of 10.24%, while Gabriel’s net profit margin was just 4.45% in FY23.

Material costs were Gabriel India’s largest expense, accounting for 75% of net revenue, compared to only 66% for Banco Products. This may be due to major costs resulting from low operating margins.

rate of return

The return on equity for Banco Products and Gabriel India was 23.76% and 16.2%, respectively. Due to increased profit margins, Banco Products has continued to improve its return on equity since FY21.

With regard to return on capital employed, Banco Products reported an ROCE of 24.17% in FY23 compared to Gabriel India’s 20.34%. Over the long term, both companies have posted similar ROCE, averaging about 19% over the past five years.

The reason Banco’s ROCE is equal to Gabriel’s ROCE over five years is because Banco has relatively more debt than Gabriel. However, in FY23, Banco expanded these returns by 235 bps, extending its lead in ROCE.

debt analysis

Banco has higher debt compared to Gabriel, which maintains a debt-to-equity ratio of 0.04x in FY23. In comparison, Gabriel India has debt to assets of just 0.01x, making it virtually debt-free.

With interest coverage ratios of Banco and Gabriel India at 37x and 33x respectively, both companies have sufficient earnings to service their debt costs.

Future plans for Banco products

1. The company has already started product development to manufacture the refrigeration and gasket sealing segments for domestic and international markets.
2. Banco Products will continue to expand its presence in export markets.
3. Last year, the company recorded its largest ever product launch in export markets. NRF reported the highest revenue growth in the previous year and continues to do so.

Future Plans Gabriel India

1. Gabriel India aims to establish itself as one of the top five manufacturers of shock absorbers globally. We will achieve this by expanding our presence in the EV and SUV segments.
2. The company plans to diversify its business into other sectors. However, no further details were provided. Management is still reviewing it.
3. We are also leveraging AI and ML to enable digital transformation and robotics in product life cycle management, noise vibration, harshness measurement, and other systems.

key indicators

We now understand the businesses of both companies and have a good comparison of their financial positions. Now let’s look at some key indicators.

conclusion

Banco Products and Gabriel India are both engaged in auto component manufacturing, but they produce specific products for niche markets. Banco Products remains on strong footing to outperform peer Gabriel India financially.

Even in price-to-earnings terms, Banco Products is trading at half the value of Gabriel India and has a PE of just 16x. However, as mentioned earlier, both companies have already generated multiple bagger profits in just one year. So only time will tell if there’s still steam left in the stock.

Still, which stocks would you choose for your portfolio? Is there a better auto parts manufacturer? Let us know in the comments below.

Written by Nasir Hussein

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