Buy JBM Auto; target of Rs 390: Dolat Capital

Dolat Capital's research report on JBM Auto

JBM Auto (JBMA)’s results were better than estimates in 4QFY19 (revenue +8%, PAT+13% YoY), despite challenging environment in the PV segment, due to a strong revival in the bus business and a robust growth in the tooling business. We are positive on the stock based on 1) new order wins in the sheet metal business, from M&M, Tata Motors, and VECV; 2) encouraging revenue potential in the tooling business (high margin +30%), given rising localization and outsourcing of tooling requirements by large global OEMs (cost-benefit of 25% in India); and 3) increasing economies of scale in the bus business, which should aid profitability in the future. We forecast a 23% EPS CAGR over FY19-21E. The stock is currently available at 10/8x for FY20/21E.

Outlook

We recommend Buy rating on the stock, with a TP ` 390 (15x 21E EPS).