Multibagger Stock | Strong Buy Of Jamna Auto For 80% Gain

Jamna Auto Multibagger

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:




Company Overview

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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Key Highlights

-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.

Click here to download the report on Jamna Auto Industries




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Comments (4)

  1. Abhijit chiring

    Dear sir,

    I want to invest a penny stock named urja global Ltd. Which products are basically on solar energy. And recently AP GOVT and urja global signed a mou for development of ecars and lithium ion batteries.
    Sir, is it good for long term holding basis . and from other side, If BJP govt. will Continue win the race, then renewal energy stocks will get benefit for atleast five years.

    Reply
  2. Paramesh

    Dear sir,
    Iam new to your blog. I have seen you recommending 2 auto stocks in this month. Do you see sector wise growth in auto industry or its just company basis.

    You are saying a multibagger stock but the returns that you promise is just 80%. How can you call it as a multibagger sir. A multibagger should return double, triple kind of retuns. Pls clarify sir.

    Reply
    1. michael (Post author)

      (1) Auto ancillary stocks have been great wealth creators in the past. They are presently subdued owing to high commodity prices and lowered festival demand. However, this may be the ideal opportunity for long-term investors to build a portfolio of these stocks.

      The auto ancillary stocks are well run with good management, good products, strong OEM clients, high RoE, low debt etc.

      (2) A stock which grows at 26% CAGR doubles every three years. In 10 years, the principal sum grows 10x. In 20 years, it grows 100x.

      Such stocks can be described as multibaggers. A stock cannot become a multibagger in one year but if in 10 years if it can give 10x (1000%) gain, we would be regarded as brilliant investors.

      In fact, Warren Buffett compounded his wealth at a relatively modest 19% CAGR. However, he was able to amass so much wealth because he consistently compounded his wealth over a very long period of 60+ years.

      So, if the recommended stocks are indeed able to give a return of 26% or more, we should be very happy.

      Reply
      1. Paramesh

        Hello Michael,

        1. Auto ancillary stocks might be at low valuations but how can you say that this better time to enter these stocks. How these companies are going to make money in the coming 1 or 2 years period? You have to understand this first. Low valuations alone cannot move a stock price up. There should be some growth potential. Then it will move up.

        2. ‘A stock cannot become a multibagger in one year but if in 10 years if it can give 10x (1000%) gain’. You have accepted the fact that a stock should return 10X returns in 10 years. But a stock which gives 26% CAGR cannot be called a multibagger by any definition.

        If you invest and hold it for 10 years and the returns are 10x, then only we should call it a multibagger.

        Reply

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