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 ankit shah's Stock Idea
Ankit shah is Bullish on Jamna Auto Industries Ltd.
Idea Submitted on 06Dec,2018
  • 5 Total Ideas
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      Buy Jamna Auto Inds. Idea
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      Idea Status :  Closed
    Stop Loss Triggered
    Idea Closed at 54.6 (28Jan,19 09:29:am)
     Time Frame
     Start Price
     Target Price
     Stop Loss
     Projected Gain
    8.25 (13.36% Upside)
     Returns Achieved
    -7.15     -11.58%
    PerformanceBelow Expectations; Retain Buy Due To Strong Outlook [b]Jamna Auto’s 2QFY19 earnings were 16% below our estimate largelybecause of lower sales as well as margins. The company reported EBITDA margin of 12.4% which was down ~70bps YoY and 140bps below our estimate. Net sales for the quarter at Rs5.5bn grew 42% YoY and were 4% below our estimate. Absolute EBITDA at Rs680mn grew 35% YoY and was 14% below our estimate. Jamna Auto increased its market share in 2QFY19 to 70% versus 69% in 1QFY19. Lower sales as well as margins, in our view, is because of a lower share of parabolic springs as these are high-value and high-margin products which have witnessed a rising trend in the past few quarters. PAT for the quarter at Rs355mn grew 21% YoY and was 16% below our estimate. We continue to like Jamna Auto as we believe that it is a good bet on commercial vehicle (CV) cycle for the next few years and expect it to outperform the industry growth rate because of market share gains and a better product mix. We have factored in 19%/21%/21% sales/EBITDA/PAT CAGR, respectively over FY18-FY21E. We have retained our Buy rating on Jamna Auto with a target price of Rs99, valuing the stock at 18x September 2020E EPS of Rs5.5. Jamna Auto’s current valuation at 12x FY21E EPS, in our view, is quite attractive and has limited downside risk from the current level.[/b]Strong top-line growth, continues to gain market share: Jamna Auto’s 2QFY19 netsales grew by a robust 42% YoY driven by market share gains and strong growth in CV volume. The company has increased its market share to 70% in 2QFY19 from 69% in 1QFY19. Jamna Auto’s 2QFY19 sales were 4% below our estimate which we believe is because of a lower share of high-value and high-margin parabolic springs. We believe that Jamna Auto will continue to grow faster than the CV industry as we expect parabolic and other products like lift axle and lift suspension to gain momentum in the coming years and believe the share of these products will improve going forward. We have factored in a 19% CAGR in Jamna Auto’s (JAL‘s) sales over FY18-FY21E.De-risking revenue mix to reduce OEM dependence: JAL has been focusing on thehigh- margin replacement and export markets to reduce its exposure to the cyclical CV business. It has a large after-market presence for leaf springs in India where margins are higher when compared to sales to OEMs. The after-market business, post Goods and Services Tax (GST) implementation, is projected to be a big demand driver for the company and we accordingly factor in a 29% CAGR in after-market revenues over FY18-FY21E, resulting in its revenue share rising to 19% in FY21E from ~15% currently.Valuation and outlook: We have retained Buy rating on JAL with atarget price of Rs99, up 38% from the current market price (20x September 2020E EPS).
     Stock Price Movement (EOD Basis)
     C.M.P Jamna Auto Inds.
    Buy Calls: 11 Sell Calls: 1
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