Dolat Capital recommended accumulate rating on Jamna Auto Industries with a target price of Rs 40 in its research report dated August 19, 2019.
Dolat Capital's research report on Jamna Auto Industries
Jamna Auto reported weak set of numbers in Q1FY20. The revenue was ` 4.2bn (-25% YoY on a high base), due to slowdown in CV sales along with weaker product mix (affected by a shift in demand towards lower tonnage vehicles, a lower revenue from parabolic springs & lift axle and muted aftermarket sale). However, the company is maintaining its dominance in the domestic OEM segment with 71% market share in leaf springs and focused on widening its distribution network (through tie-ups with retailers and garage personnel in aftermarket segment). The management has also learnt from the past and deferred its capacity expansion plan to keep leverage under check (earlier the company had a planned a capex of ` 5bn in the next 3-4 years for its greenfield project at Adityapur and Indore. Given the lower-than-expected pre buying impact for BS-VI driven by GST related uncertainty and slowdown in economy, we cut our EPS estimates by 39/30% for FY20/21E.
We expect the growth momentum in CV to revive materially only post clarity of GST and uptick in economic activity. We change our rating from Buy to Accumulate, with a lower TP of ` 40 (12x FY21E EPS).
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