This Small-Cap Auto Stock Gets Buy Call For 32% Gains, Given 151% Returns in 5 Years

ICICI Direct in its report published on June 28, has given a buy call to Jamna Auto Industries Ltd. for a target price of Rs 155 per share. Jamna Auto Industries is a manufacturer of suspension products (leaf & parabolic) for commercial vehicles (largely M&HCV space) and was established in 1965. It has eight manufacturing plants in India, each in close proximity to CV OEMs, with installed capacity of ~3,00,000 metric tonnes.

Stock Outlook

Jamna Auto Industries' current market price (CMP) is Rs 117.65 per share. From the previous close of Rs 112.45 per share, the stock today gained nearly 5.38%. The stock's 52-week low is Rs 78.60 per share, recorded on 24th August 2021. While the 52-week high is 125 per share, recorded on 17 January 2022.

CMP	Target Price	Potential Gains
Rs 117.65	Rs 155	32.00%

Taking the brokerage's estimated Target Price of Rs 775 and the CMP of the stock into consideration, the stock could witness a potential upside of 32% in 12 months.

Return on Investment

In terms of returns on investment, the stock of the Jamna Auto Industries has performed well over the last 1 year and gained a massive 151.87%. The stock has delivered positive returns across the tenure. In the past 1 year, it has given 42.61%, and in 3 years it gave 123.03%. In the past 1 week, it delivered a promising return of 11.04%. The stock has delivered good returns over the years. 

1 Year	3 Years	5 Years
123.03%	123.03%	151.87%

 

FY22 Reports

Jamna Auto Industries reported a healthy performance in FY22.

• Consolidated sales rose 59% YoY to Rs 1,718 crore. EBITDA was at Rs 226 crore with margins up 90 bps YoY to 13.2%. 
• Consolidated PAT was up 93% YoY to Rs 141 crore.
• FY22 sales product mix: OEMs: 63%; new market: 37%
• FY22 sales market mix: OEM: 77%; new market (aftermarket+exports):23%

Key triggers for future price performance

• Outsized beneficiary of cyclical upswing in the M&HCV space with dominant supplier of suspension system & ambitious targets of diversifying product basket as well as client profile. We build 29.6% sales CAGR over FY22-24E.
• With increasing share of parabolic springs vs. the traditional product, cooling off in steel prices as well as operating leverage at play, we see EBITDA margins inching up to ~14.5% mark in FY24E vs. 13.2% in FY22.
• Ambitious target of achieving 50% RoCE, 50% dividend payout, 50% revenues from new products & 50% revenue from new markets by FY26E.
• Limited leverage of b/s (debt: equity at 0.3x) with history ~3x asset turns, double digit EBITDA margins, controlled WC cycle & largely positive CFO.
• Vision to become a global leader in automobile suspension solutions

Valuation - Brokerage Views & Recommendation

Over the past five years, Jamna Auto Industries has outperformed the wider Nifty Auto index, with share price growing at ~17% CAGR from June 2017. We value Jamna Auto Industries at Rs 155 i.e. 22x P/E on FY24E EPS of Rs 7/share (implied EV/EBITDA ratio of ~15x, a tad premium to its last up-cycle multiple). We initiate coverage on Jamna Auto Industries under I-Direct Instinct format with a BUY rating.

Jamna Auto Industries

Jamna Auto Industries is a leading auto ancillary company headquartered in Delhi and established by Bhupinder Singh Jauhar in 1965. It has been a supplier of leaf and parabolic springs to all major CV manufacturers in India for over 60 years. Jamna Auto Industries was the first to introduce parabolic springs in India. It has eight strategically located manufacturing facilities at Yamuna Nagar, Malanpur, Jamshedpur, Pune, Chennai, Pilliapakkam, Hosur and Pant Nagar each in close proximity to leading OEMs.

Disclaimer

The stock has been picked from the brokerage report of ICICI DIrect. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.