Comments
CD EQUISEARCH
Jamna Auto (Buy)
CMP: ₹218.10
Target: ₹265
Business stability eludes for the CV industry has come to a stuttering halt in last three months after a record expansion —cumulative domestic sales rose by a puny 2.4 per cent in June-August period, while M&HCV sales slid 5.6 per cent — invoking uncertainty.
By assiduously ramping up its after market presence by maze of distributors and direct dealers, Jamna has not only throttled the incumbents but lessened its reliance on OEMs.
Gargantuan increase in dealer count (over four-fold in the last four years), unveiling of four regional depots and timely capacity expansion at Malanpur helped it log nearly 35 per cent business growth in five years ending FY14, propelling after market revenue share to 21 per cent from sub 10 per cent.
Jamna’s average spring volumes growth of 12.3 per cent over the next two years (FY16-18) will toe CV industry growth of 11.2 per cent, solidifying its conventional spring OEM market share. Still forbearance of the CV industry has not only tested auto component suppliers but also big-wigs such as Tata Motors and Ashok Leyland. On balance, we advise buying the stock with target of ₹265 (previous target: ₹159) based on 18x FY18e earnings (peg ratio: 0.7) over a period of 9-12 months.
Business Line is not responsible for the recommendations sourced from third party brokerages. Reports may be sent to: blmarketwatch@gmail.com
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.