Fundamental Analysis of Jamna Auto Industries: India’s infrastructure is growing at a rapid rate, led by an increase in consumer as well as government spending on infrastructure. This has increased the demand for goods to be transported throughout the country.
One stock to benefit from this development is Jamna Auto industries. In this article, we will perform a fundamental analysis of Jamna Auto Industries and see where the company stands in the market.
Table of Contents
Fundamental Analysis of Jamna Auto Industries
Herein, we will take a look at the Company’s operations, and understand the Ancillary industry & its growth prospects. Then we will fundamentally analyze the Company’s financial, and its future outlook & finally arrive at a conclusion.
Company Overview
Jamna Auto Industries was founded by Bhupinder Singh Jauhar in 1954. What began as a small shop in Yamunanagar selling springs now provides all kinds of suspension solutions for Commercial Vehicles (CVs). The Company is currently headed by Randeep Singh Jauhar, who serves as the Company’s Chairman and managing director.
Jamna Auto provides Leaf Springs, Parabolic Springs, Lift Axles, Trailer Suspension and Air suspension, and Allied components for the segments of Commercial Vehicles (CV).
It has 8 existing plants, 2 newly launched & 2 plants under construction, spread across India. Its clients include the likes of Tata Motors, Force Motors, Ashok Leyland, Scania, Volvo, Isuzu, and Bharat Benz among others.
Now we will understand Jamna Auto’s segments individually
Segment Analysis
Original Equipment Manufacturers (OEMs): It currently comprises Conventional Leaf Springs, Parabolic Leaf Springs, and Z-Springs among others. It soon plans to launch Bogie Bracket, ATS Bracket, Hanger Shackles, Spring Pin & U-Bolt.
Ashok Leyland, Bharat Benz, Force Motors are the OEM clients of Jamna. It also has collaboration with NHK Spring Co. Ltd, Japan for Tapered Leaf Springs & Ridewell Corporation, USA for manufacturing of Design & Manufacturing of Air suspension Axles.
Aftermarket (Domestic): In this segment, the Company offers Brake Lining, Trailer Axle, Water Pump, and Clutch among others. Jamna has 300 + distributors, 11500+ stores, and 15000+ mechanics. The company is focusing on addressing market of highly consumable items.
Aftermarket (International): Jamna currently exports 800 different items to over 15 countries across the globe. It aims to add approx. 40 new countries in the next 12 months. It has two domestically set up manufacturing plants that exclusively cater to its export requirement. It has also set up a dedicated team in United States, Latin America & Commonwealth of Independent States (CIS).
Agri-division: Under this division Jamna offers Rotavator, Cultivator, Fertilizer Broadcaster, Laser Land Leveller & 5 such other products. It is also set to launch a whole host of products such as the Sub soiler, Disc Plough, Trailer, Mulcher,
In FY2023, the Company also began to supply agricultural implements for the open market and it currently focuses on developing products for M&M’s export requirements. With the intent of increasing its content per vehicle, the company has commenced the supply of machined castings to Leyland in Uttaranchal for mining and heavy trucks.
Industry Overview
The Indian auto ancillary industry is one of the crucial industries in India and contributes 2.3% to the total GDP, employing about 15 Lakh people directly and indirectly. The sector derives 61% of its revenue from OEMs, 18% from the aftermarket, and 21% from exports.
The Commercial vehicle demand grew as high as 34% in the previous year, close to the pre-COVID peak level of FY19. This led to an equivalent rise in its ancillary sector. The sector is estimated to grow by 14-16% this fiscal year.
An increase in demand for Passenger & commercial vehicles in FY23 would help increase the demand from OEMs to grow by 18-20%. The demand growth for aftermarket products is estimated to be 7-8% this fiscal. The export business witnessed 40% growth in FY22 and is expected to increase 8-10% in FY23 owing to stable demand from the European and US markets.
Growth in infrastructure development spending, road construction projects, mining, E-commerce & construction activity is primarily driving demand for CVs.
The industry ended the year on a strong note, with impressive growth among OEMs as well as after-market. The implementation of the scrappage policy is likely to spur further demand for CVs. However, supply chain disruptions and fluctuation in commodity prices remain a challenge haunting the auto ancillary industry
Jamna Auto Industries – Financials
Revenue & Net Profit Growth
Jamna grew its topline by 35.36%, growing from Rs. 1718 Cr. in FY22 to Rs. 2523 Cr. in FY23 to hit a 5-year high. Despite such high growth in revenue, the Company was able to increase its profitability by only 19.58%, from Rs. 141 Cr. in FY22 to Rs. 168 Cr. in FY23.
However, the Company’s performance is really slow on a long-term basis recording a 5-year CAGR of only 2.16% & PAT of 5.2%.
The Company also reported a spectacular jump in Operating cash flow increasing by 343x over last year on account of conversions of Trade Receivables to cash.
| Fiscal Year | Operating Revenue | Net Profit |
|---|---|---|
| 2023 | 2325.32 | 168.37 |
| 2022 | 1717.88 | 140.8 |
| 2021 | 1079.48 | 72.96 |
| 2020 | 1128.95 | 47.88 |
| 2019 | 2134.81 | 137.45 |
| 5-Year CAGR | 2.16% | 5.20% |
Profit Margins
The Company has reported 11.27% Operating Margins (OPM) & single digit Net Profit Margins (NPM) of 7.24%.
The Company hit a 3 3-year low in terms of OPM. This goes to show how the industry as well as the Company operate on razor-thin margins.
Raw material is the most significant cost driver for the Company, costing 68.3% of its Net Sales, while fuel & employee benefit expenses cost 7.32% & 6.24% respectively.
| Fiscal Year | Operating Profit Margin | Net Profit Margin |
|---|---|---|
| 2023 | 11.27% | 7.24% |
| 2022 | 13.23% | 8.20% |
| 2021 | 12.38% | 6.76% |
| 2020 | 10.15% | 4.24% |
| 2019 | 13.05% | 6.44% |
| 5 Year Average | 12.01% | 6.58% |
Return Ratios
Despite tackling razor-thin margins, the company reports a RoCE of 27.95% & RoE of 23.02%, a 4-year high for the Company. Return ratios increased due to the increase in PAT of Rs. 168 Cr., which was a 5-year high for the Company.
The fact that the Company is able to maintain a RoE above 20% despite single-digit margins shows that the Company is not focused on reinvesting its earnings rather than taking debt.
| Fiscal Year | RoCE | RoE |
|---|---|---|
| 2023 | 27.95% | 23.02% |
| 2022 | 25.10% | 22.32% |
| 2021 | 15.99% | 13.31% |
| 2020 | 15.33% | 9.33% |
| 2019 | 48.62% | 29.45% |
| 5 Year Average | 26.60% | 19.49% |
Debt Analysis
Jamna Auto is virtually a debt-free Company, with a D2E of 0.02x. Its debt-to-equity ratio fell from 0.26x last year, on account of repayment of short-term obligations that came down from Rs. 178 Cr. to just about Rs 19 Cr. This led to even stronger fortification in the Company’s finances as the Interest Coverage ratio jumped from 46.85x to 67.45x.
| Fiscal Year | Debt / Equity | Interest Coverage |
|---|---|---|
| 2023 | 0.02 | 67.45 |
| 2022 | 0.26 | 46.85 |
| 2021 | 0.20 | 14.77 |
| 2020 | 0.28 | 4.93 |
| 2019 | 0.01 | 8.83 |
Key Metrics Of Jamna Auto Industries
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | 124.9 | Market Cap (Cr.) | 4845.81 |
| EPS (TTM) | 4.43 | Stock P/E (TTM) | 27.45 |
| RoE | 23.02% | RoCE | 27.95% |
| Promoter Holding | 49.95% | Book Value | 21.31 |
| Debt to Equity | 0.02 | Price to Book Value | 5.86 |
| Net Profit Margin | 7.24% | Operating Profit Margin | 11.27% |
Future Plans Of Jamna Auto Industries
- A new plant has been established in Jharkhand, which is anticipated to be fully operational by the second quarter of FY 24. The facility will manufacture parabolic springs for use in Heavy Commercial Vehicles (HCVs). This is in response to the growing need for lighter products, to comply with BS6 norms.
- The Company has also increased its Capital Expenditure (CAPEX) from Rs. 37 Cr. in FY22 to Rs. 88 Cr. in FY23, a 139% increase.
- The Company has set a target “Lakshya 50XT” which aims to earn 50% of its revenue from its new products segment, new markets, and Dividend Payout from the current 44%, 20% & 45% respectively. It has set a deadline of 2027 to achieve these targets.
Conclusion
After a thorough analysis of Jamna Auto Industries, we understand that the Company is poised for spectacular growth on the back of the Commercial vehicle segment.
The Company also increased dividend payout to its shareholders, by 80%, from Rs. 39Cr. To Rs. 72Cr. This resulted in the dividend payout ratio (DPR) increasing from 43% to 45%, it now targets to achieve a DPR of 50% in the upcoming 5 Years.
So will the CV segment continue to grow giving a push to Jamna Auto? Should the Company focus on building a footprint in the foreign markets or should it just fortify its presence in domestic markets? Let us know in the comments below.
Written by Nasir Hussain
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