Stewart & Mackertich has recommended the “strong buy” of a high-quality auto ancillary stock. It is the undisputed leader of the Indian automotive suspension space with a mammoth 72% share in the OEM segment. It is the India’s largest and world’s second largest manufacturer of tapered leaf springs & parabolic springs for Commercial Vehicles (CVs) in India.
Jamna Auto Industries Ltd is the recommended stock. Click here to read the report.
Jamna Auto Industries Ltd is presently quoting at Rs. 71.
The target price is Rs. 128.
Accordingly the potential gain is 80.50%.
The investment rationale of the buy recommendation is as follows:
Jamna Auto Industries Limited (JAI) is the undisputed leader of the Indian automotive suspension space with a mammoth 72% share in the OEM segment. It is the India’s largest and world’s second largest manufacturer of tapered leaf springs & parabolic springs for Commercial Vehicles (CVs) in India with an annual production capacity of 240,000 MT and produces over 500 modes of springs for OEMs.
It has been a trusted and preferred supplier of Leaf and Parabolic Springs to all major CV manufacturers for over 50 years. The Company has 9 strategically located state-of-the art manufacturing facilities at Yamuna Nagar, Malanpur, Jamshedpur, Pune, Chennai, Pilliapakkam, Hosur, Pant Nagar and Lucknow.
It supplies to auto OEMs across the globe and boasts of a strong clientele consisting of Ashok Leyland, Tata Motors, General Motors, Kamaz Motors, SML ISUZU, Mahindra & Mahindra, Volvo and others.
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-Consolidated revenue for Q2FY19 reported at INR548.4 crore, up 42.4% YoY owing to the strong volume growth in the CV segment. It has managed to beat our estimate of INR521 crore.
Despite having a strong market share, rising raw material prices have dented its gross margin by 144 bps YoY to 36%.
-Absolute EBITDA for the quarter under review stood at INR68 crore, up ~35% YoY, which is marginally lower than our estimate of INR70 crore. Despite optimization in employee benefit expense and other expenses, EBITDA margin dipped 66bps YoY to 12.4%.
-Co. reported a PAT of INR35.5 crore, up ~21% YoY, which is marginally lower than our estimate of INR37 crore. However, PAT margin dropped by 117bps YoY to 6.5% due to higher higher financing cost and effective tax rate.
-The Board of Directors has declared an Interim dividend of INR0.50 per equity share of INR1 each amounting to ~INR20 crore on the paid-up equity capital.