By Anand Rathi
Jamna Auto is the largest leaf spring manufacturer in India and the third largest globally (in terms of installed capacity). The company has 73 percent market share in the Indian OEM segment and produces over 500 modes of springs for OEMs and ~2000 parts for After Market.
In Q2FY18, the revenue grew by 27 percent y-o-y while net profit grew by 36 percent y-o-y led by traction in higher tonnage vehicles. Recovery in OEM segment coupled with Aftermarket focus to drive growth.
The house expect revenues to grow 12.5 percent in the next three Revenue and growth years, driven by a 12 percent CAGR in OEM and 15percent in the aftermarket. The new plant in Hosur is to serve the export market and multinationals such as Daimler and Volvo.
Accordingly, the firm expects earnings to register an 18.5 percent CAGR to Rs 1.73 billion, leading to an EPS of Rs 4.35.
Jamna Auto | Rating: Buy | Target: Rs 95 | Return: 18%
The stock trades at 21x FY19e EPS and 18x FY20e EPS. Anand Rathi has initiated coverage with a Buy and a price target of Rs 95, assigning 22x FY20e EPS, However, the key risks include steep decline in M&H CV growth and delay in expanding its dealer network in the replacement market.
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