SPA Research has come out with its visit note on JMT Auto. According to the research firm, the automobile industry is currently going through a tough phase but it is likely to see some signs of revival post FY13.
SPA Research has come out with its visit note on JMT Auto . According to the research firm, the automobile industry is currently going through a tough phase but it is likely to see some signs of revival post FY13.
Manufactures 1200 different components:
JMT has acquired core competency in manufacturing 1200 different automobile components ranging from Engine components, Gears, Shafts, Pins, Bushes, Idler Bearings, Carrier Housing, Gear Rings, Axles, Synchro Cones, Carriers, Gear Box Assemblies & others which are primarily used in M&HC Vehicles, Tractors and Diesel Engines. ~42% of revenues come from gears.
Diversified Revenue Base:
The company has gradually shifted its dependency from Auto Industry by diversifying into sectors like Agriculture, Off Shore Drilling, Earth Moving, Hydraulics, Aerospace, Railways and Defense. Moreover, the company has also moved into exports on a large scale to further diversify its geographical reach, which reduces its vulnerability to any slowdown from any single market.
Marquee clients: The company supplies to almost all major OEMs in the domestic market as well as few global companies. Its domestic OEM clients include Tata Motors, TELCON, TAFE, Tata Cummins, Timken India whereas globally the company supplies to Halliburton, Eaton Hydraulics, CNH America, VCST, and General Motors among others. JMT meets ~50% of requirement of gears, shafts axles of Tata Motors. Tata Motors constitute ~47% of its revenues.
Outlook and Valuation: Though the automobile industry is currently going through a tough phase but it is likely to see some signs of revival post FY13. With the set up of new cold forging plant (leading to reduction in raw material costs), strong accessibility to OEMs, Independent & Integrated manufacturing facilities, diversified presence across industries and increased focus on exports, JMT remains well placed to leverage on opportunities going ahead. Currently the stock is trading at a P/E of 6.6 TTM earnings.
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