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CD Equisearch
Jamna Auto (Accumulate)
CMP: ₹136
Target: ₹159
Jamna Auto Industries is the largest manufacturer of Tapered Leaf and Parabolic Springs for commercial vehicles (CVs) in India. It has been a trusted and preferred supplier of Leaf and Parabolic Springs to all major CV manufacturers for over 50 years.
Helped mainly by increasing infrastructure investment, resurrection of mining activities and steady replacement demand, the M&HCV segment reported a respectable 30.6 per cent growth in domestic sales in eleven months of current fiscal. Incessant fall in diesel prices and decline in interest rates have prompted fleet operators to replenish their ageing fleet, stoking demand. Recently announced GOI’s schemes such as Smart Cities Mission and Housing for All by 2022, among others, would also buoy dispatches of CV industry not least because of rising logistics demand. Implementation of GST would also do wonders.
By focusing on its top customers, Jamna aims to further strengthen its grip on the multi leaf springs original equipment manufacturer market (nearly two-third market share). Operating margins advanced this fiscal (11.2 per cent vs 7.4 per cent) not least due to the brutal fall in commodity prices. Despite its focus on weeding out low margin product portfolio and enhanced aftermarket presence, the current margins are unsustainable — margins estimated to thin out a bit next fiscal.
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