JBM Auto Ltd - Research Report

 

Private Client Research

Rating

Buy

Sector

Auto Ancillaries

Company

JBM Auto Ltd

Reco Price
Rs. 351.6
Price Target (12 Months)
Rs. 635
Upside
80.60%

Date

16 July 2014
Sensex
25228.65
CNX Nifty
7526.65

Exchange

Code

NSE
JBMA
BSE
532605

Strong business verticals and capex programmes will lead to revenue visibility in next three years.

Strong Group:
India’s premium diversified conglomerate with 35 manufacturing plants, 5 Engineering & Design Centers across 19 locations worldwide, 16,000 employees, servicing world renowned global automotive majors. With a turnover of 1.2 billion USD, JBM Group is globally recognized for setting new benchmarks in manufacturing automobile products and sub –systems, steel fabrication, construction, engineering and design through extensive use of innovation and technology.

Closed Proximity:
The Company’s manufacturing facilities and tool rooms are strategically located in close proximity of leading automobile hubs of India at Faridabad, Greater Noida, Nashik, Chennai, Sanand and pune for catering to diversified clients. The state–of-the art plant at Greater Noida, set up in the year 2003 caters to the fast expanding domestic automobile industry. Greater Noida is also home to several large domestic and MNC automobile companies. In the year 2006, the JBMAL further expanded by putting up a new manufacturing unit at Nashik, in Maharashtra another strategic location.

Diversified Business Model:
JBM is engaged in the manufacturing of tools, dies and moulds. It operates in three segments: Sheet Metal Division (for manufacturing sheet metal components, assemblies, sub-assemblies), Tool Room Division (for manufacturing tools, dies and moulds) and Special Purpose Vehicle (SPV) division (for development and assembly of SPV). JBM products are widely used in two-wheelers, cars, tractors and trucks, white goods industries and other sectors in India and overseas. Hence this gives company added advantage of having well distributed sales strategy.

Big Expansion Plans:
JBM's expansion projects at Pithampur, Indore (M.P.) to cater to Volvo Eicher Commercial Vehicles (VECV) and Mahindra two wheelers (M2W) projects for supply of sheet metal components, assemblies etc. commenced production from 20 July 2013. The Patheri unit commenced production from 01 February 2014. JBM plans set up a new manufacturing plant in Indore at an investment of Rs100 crore and the new unit is expected to be operational later this year. JBM has also installed new facilities for manufacturing of passenger buses and other allied products at its manufacturing units situated at Ballabgarh (Faridabad) and Kosi Kalan (Mathura). These expansions shall give JBM a big leap forward to generate the revenue for the future growth. Two Greenfield facilities for the bus venture are being set up in Delhi-NCR with a phased investment of `500 crore, with the main plant to be located at Kosi while the second facility will be located at Ballabhgarh, both near Faridabad in Haryana. While fabrication and the bus structure will be made at the Ballabhgarh plant, the Kosi facility will assemble the buses. Hence there are the big expansion plans by the company going forward.

Quick responsive:
Strong in house engineering and manufacturing capabilities enables it to meet the fast changing requirements of customers. To ensure best QCDD (Quality Cost, Development & Deliveries), JBM Auto has invested in world class vertically integrated infrastructure and boasts of one of the best tool rooms of the country. JBM’s long years of experience working with global majors combined with the group’s experience has enabled JBM acquire and absorb the best global practices. Some of these include JIT, Pokayoke, Kanban, Lean Manufacturing, Kaizen etc. JBM on its part has combined the best practices and has evolved its own unique system called ‘The JBM Way’.

Strong Clients:
JBM is involved in the design of all vehicle types right from concept stage including packaging and engineering and is working on projects with Volvo, Fiat, Mahindra & Mahindra, Volkswagen AG, Ashok Leyland, Tata Motors and other OEMs. It also provides engineering services to Mercedes-Benz/Daimler, Lamborghini and McLaren. JBM is also strong in verticals like suspension, vehicle integration, electronics and trim and JBM is now tapping these avenues for growth. While the parts maker is focusing on optimising its investments this fiscal, it continues to work on several new projects even as it waits for the market to pick up.

Stock Data

CMP (Rs)
352.3
Face value (Rs)
10
52 Week Range (Rs)
389 - 48.15
Market cap (Rs Crores)
358.38
Price To Book Value (x)
2.23
P/E Ratio (x)
7.16
EV/EBIDTA (x)
3.64

One Year indexed Stock Performance

JBM Auto LtdSensex
JBM Auto Ltd
Performance (%)
1m
6m
1year
Absolute
31.47
107.03
526.52
Sensex
0.15
12.20
25.93

Shareholders

(in %)
31-Mar
Promoter
61.99
FII
-
DII
0.25
Others
37.76
Total
100

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Auto Industry

The Indian auto component industry’s turnover is reported to be US$40.6 billion in 2012-13 and is projected to touch US$115 billion by 2020-21, according to data provided by Automotive Component Manufactures Association (ACMA). The industry is estimated to grow at a compound annual growth rate (CAGR) of 14% during 2013-21. Moreover, the industry’s exports were recorded at US$9.3 billion in 2012-13 and are projected to touch US$30 billion by 2020-21 as per ACMA. The industry is expected to invest around Rs 70 billion (US$1.13 billion) over the next three years on new projects, as per rating agency ICRA’s estimates. The investments are foreseen on back of auto manufacturers, such as Maruti Suzuki, Hero MotoCorp and Ford planning to establish Greenfield facilities in Gujarat, prompting component makers to invest around these facilities. In addition, the automotive aftermarket is poised for robust growth, as per a McKinsey & Co report titled, ‘Scaling the Indian Automotive Aftermarket: Path to Profitable Growth’.

Profile

JBM was set up in 1990, mainly to manufactures tools, dies and moulds at Faridabad. It also established a press shop for manufacturing sheet metal parts and welded sub-assemblies to meet the growing stringent quality requirements of automobile industry. In April, 2009, JBM acquired a 73.89% interest from Thyssenkrupp Tallent Limited (TKTL) in the ThyssenKrupp JBM (P) Ltd., a joint venture between JBM and TKTL, known as JBM Auto System Private Limited (JBMASL). After this acquisition, JBMASL has become subsidiary of JBM.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Particulars
Mar-12
Mar-13
Mar-14
Mar-15E
Mar-16E
Income:-
  • Net Sales & Other Operating Income
  • Growth (%)
  • Total Expenditure
  • EBITDA
  • EBITDA Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • PBT
  • Tax
  • Profit After Tax
  • Adj Calculated EPS (Unit.Curr.)
  • 967.32
  • -
  • 855.69
  • 111.63
  • 11.54
  • 5.78
  • 117.41
  • 39.23
  • 78.18
  • 30.34
  • 47.84
  • 15.85
  • 31.99
  • 25.37
  • 1170.96
  • 21.05
  • 1038.63
  • 132.34
  • 11.30
  • 3.81
  • 136.14
  • 43.48
  • 92.95
  • 33.11
  • 59.84
  • 21.89
  • 37.95
  • 31.97
  • 1363.89
  • 16.48
  • 1209.32
  • 154.57
  • 11.33
  • 5.59
  • 160.16
  • 35.98
  • 124.17
  • 40.16
  • 84.02
  • 27.03
  • 56.99
  • 49.23
  • 1625
  • 19.14
  • 1433
  • 192
  • 11.82
  • 5.50
  • 197.5
  • 36
  • 161.5
  • 44.5
  • 117.00
  • 38.61
  • 78.39
  • 67.72
  • 1950
  • 20.00
  • 1715
  • 235
  • 12.05
  • 5.50
  • 240.5
  • 36
  • 204.5
  • 47.5
  • 157.00
  • 51.81
  • 105.19
  • 90.87
Source: Stockaxis Research, Company Data

Valuation

Considering its strong business verticles and strong capex programmes the stock is trading at fair valuation .Also Strong in house engineering and manufacturing capabilities enables it to meet the fast changing requirements of customers which makes him as a preferred player. Hence there is huge potential for stock to get rerated in next two years.

Hence we assign fair valuation of 6.98x which indicates the target price of Rs 635 which is a huge upside from current levels.

 
 

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