Shares of a prominent manufacturer of suspension products surged by 2.6 percent on BSE to hit an intraday high at Rs. 141.5 in the trading session of Tuesday, after the stock received a “buy” recommendation by ICICI Direct for an upside of 22 percent.
With a market capitalisation now standing at Rs. 5,549.3 crore, the shares of Jamna Auto Industries Limited closed in the green at Rs. 139.1, up by nearly 1%, as against its previous closing price of Rs. 137.85.
Brokerage Target
ICICI Direct has issued a ‘buy’ recommendation on Jamna Auto, setting a target price of Rs. 170 per share, indicating a potential upside of 22 percent from Tuesday’s closing price of 139.1.
With double-digit growth anticipated and the Lakshay 50XT strategy in progress, the brokerage remains optimistic about Jamna Auto.
The brokerage has assigned a ‘buy’ rating with a target price of Rs. 170, which is based on a price-to-earnings (PE) ratio of 26 times the expected earnings for the fiscal year 2026 (FY26E).
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Brokerage Outlook
The domestic medium and heavy commercial vehicle (M&HCV) sector is recovering well in the post-covid era, with volumes expected to reach close to the previous peak of FY19 (~3.9 lakh units) by FY24 at ~3.7 lakh units.
As per the brokerage, growth is expected to slow due to a high base but remains supported by unchanged structural drivers: government capex of Rs. 11.1 lakh crore (3.4% of GDP) for FY25E, an ageing fleet driving replacement demand, better fleet operators’ profitability, and a government focus on scrappage policies and electric buses.
The government’s thrust on e-buses is also a positive factor, aligning with the focus on clean mobility.
With these structural drivers in place, ICICI Direct anticipates high single-digit growth over FY24-26E, with Jamna Auto benefiting from its leading position in M&HCV suspensions.
Jamna Auto Industries has introduced its ‘Lakshya 50XT’ vision to diversify its business model, targeting to achieve 50% sales from new products and 50% sales from new markets, RoCE of 50%, and a dividend payout of 50% by FY26-27, while currently, these figures stand at 47%, 21%, ~30%, and ~47%, respectively.
This strategic shift is expected to enhance growth longevity as the company expands its export operations and diversifies revenue streams.
Recently, Jamna Auto signed an MoU with Eicher Motors’ CV arm, VE Commercial Vehicles, to boost business and to set up a new plant in Indore, Madhya Pradesh, at a total capex outlay of nearly Rs. 125 crore.
Jamna Auto operates a highly capital-efficient business model with a strong RoCE of over 25 percent. The company generates strong positive cash flow from operations and maintains a lean balance sheet, with a debt-to-equity ratio of ~0.2 times as of FY24.
These factors provide a high margin of safety for investors and support favourable valuations moving forward.
Financials:
The company experienced a growth in revenue from operations, showing a year-on-year rise of nearly 1% from Rs. 634 crore in Q4 FY22-23 to Rs. 640.2 crore in Q4 FY23-24.
Similarly, its net profit increased during the same period from Rs. 52.5 crore to Rs. 54.8 crore, indicating a growth of around 4.4 percent YoY.
Stock performance:
The stock has delivered nearly positive returns of nearly 24 percent in one year as well as around 20 percent returns in the last six months. So far in 2024, the shares of Jamna Auto Industries have given about 24.6 percent of positive returns.
About the company:
Jamna Auto Industries Limited is engaged in the business of manufacturing and selling of automotive suspension which includes tapered leaf, Parabolic springs and Lift axles.
Written by Shivani Singh
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