Jamna Auto Industries Ltd. share price target

Topline growth lower than expectations; Revenue estimates revised downwards

After two dull quarters when sales grew by just over 7%- sales rejuvenated in Q1 - grew by 15.5% to Rs 335.13 crs ($50.2m) compared to Rs 290.07 crs ($43.m) in the same quarter a year ago. Stoked by lower raw material and fuel & power costs, OPMs expanded by some 600 bps to 15.8%...

A market leader with over 70% market in axles and leafsprings for M&HC vehicles, Jamna Auto is equally dominant in after-markets. Company is well positioned to ride on auto sector growth.

Net sales was up by 16% to Rs. 330.6Cr against Rs. 285Cr in the same quarter last fiscal led by 21% volume growth in leaf springs and 27% growth in lift axle business. Operational margin improved substantially from 9.7% to 15.8% on yearly basis.

Jamna Autos (JAI) 3QFY16 APAT at Rs 155mn ( 183% YoY) beat our estimates by 7%. Net sales were below expectations because of poor volume growth and pass through of lower commodity prices. The management clarified that a higher mix of parabolic spring sales (~20-25% lighter compared to conventional springs) led to an adverse impact on volumes.

Jamna Auto Industries (JAI) is the largest leaf spring manufacturer in India and the third largest globally (in terms of installed capacity). The company is an ideal play on the ongoing upturn in CV demand given its 66% share in domestic OEMs markets.

Jamna Auto Industries (JAI) is engaged in the manufacturing of suspension products for commercial vehicles viz leaf springs and lift axles. It is the market leader in the MHCV OEM springs commanding market share of about 60%, while it has a 15% share in the aftermarket springs segment. Recovery in OEM segment coupled with aftermarket focus to drive growth The MHCV industry is clearly in an upcycle and is poised to grow at 16% CAGR over the FY2015-2018 period. This would be on account of economic pick-up leading to uptick in freight, huge pent up demand due to low base (industry had halved over FY2013-2014 period), and improving profitability of the fleet operators on account of firm freight rates and decline in diesel prices. The industry is likely to reach pre-slowdown levels by FY2018. Apart from growth in the springs segment, JAI is witnessing robust demand for lift axles used in multi axle vehicles (JAI commenced supplies to market leader Ashok Leyland). JAI is also in negotiation with high-end bus manufacturers for supplies of air suspension systems. We expect the share of new products to inch up from 4% of revenues in FY2015 to 7% by FY2018. We expect JAI...