Small-cap multibagger Jamna Auto delivered return of 263% in 2 years

Jamna Auto Industries Limited is a supplier of suspension for commercial vehicles. Parabolic springs were initially introduced to India by the Company. They offer a wide variety of suspension options to the Indian commercial vehicle market as part of their product line. Incorporated as a partnership firm Jamna Auto Industries (JAIL) went public in Nov'85 and is currently operating as a listed company in the auto ancillary industry.

The business wants to dominate the automotive suspension solutions market on a global scale. With Tinsley Bridge Limited, UK, has a Technology Transfer and Technical Assistance Agreement in place for the transfer of TBL Extralite Spring Technology and Special Steel Technology to the business.

Even in the current bear market, jamna auto share price is soaring, reaching a new 52-week high of Rs 126.20 yesterday (29 June 2022). Furthermore, it has delivered returns of 52.5% and 263.6%over the last year and two years, respectively. So, let's investigate the reason for this rise by looking at their financials and current industry trends, and outlook for the stock in FY23.

Jamna Auto industry crossed Pre-Covid levels in FY22

Jamna auto company reported total revenue of Rs 627.1 crores for the Q4FY22, compared to Rs. 445.3 crores for the Q3FY22, up 40.82%. They also reported a net profit of Rs. 56.8 crores for the Q4FY22, up 52% QoQ, compared to a net profit of Rs 37.3 crores for the Q3FY22.

 

 

Additionally, the company recorded a YoY increase in total operating revenue of 28.67%, going from Rs 487.4 crores in Q4FY21 to Rs 627.1 crores in Q4FY22. They reported a net profit of Rs 56.8 crores in Q4FY22 compared to Rs. 47.5 crores in Q4FY22, a 19.67% increase. The company has reported total revenue of Rs1722.3 crores during FY22 as compared to Rs.1089.4 crores during FY21, up 58% on a YoY basis. While PAT saw a massive 92% growth in FY22 from Rs 72.96 crores in FY21 to 140.80 crores in FY22.

 

 

Future Corporate strategy of Jamna Auto

Their current revenue from new products and new markets stands at 37% & 23% respectively which they aim to increase it to 50% from both by end of FY26. The company’s current ROCE is 24.48% which is already a robust figure in the Auto Ancillary industry. They further plan to achieve a ROCE of 50% by FY26.

 

 

A business transfer agreement (BTA) was signed by Jai Suspension System Pvt. Ltd., a subsidiary of the company, and M/s Kalka Steels, a partnership firm, to acquire their tractor components business—namely, the production of tractor seats—on a going-concern basis. This is further going to help Jamna Auto improve their profitability and revenue over the next quarters.

 

 

Technical Analysis on Jamna Auto:

The share of Jamna Auto share price is currently trading at its 52 weeks high with 50 EMA above both 100 & 200 EMA. Moreover, buying demand is seen emerging in the stock as it reached fresh 52 weeks high with 5X volumes.

On the downside, Rs 100 is an immediate and strong support. Momentum indicators are positively poised to support the current strength (RSI at 100) of the trend. Therefore, fresh investors can consider buying the stock with a target of Rs 155 in the short to medium term, as suggested by few analysts.

 

Our View:

Analysts are expecting voluminous growth in FY23. Double-digit growth is expected in all segments of Automotive industry in FY23. Positive factors like relief in margins, better demand, supply shortages being reduced, have been adding to the growth.

Therefore, investors can maintain a bullish view on jamna auto stock in the long run. Many analysts such as ICICI Direct remain positive on CV space in which Jamna Auto with high relative rank is their preferred pick which they expect to outperform in the short run. A 15% upside can be expected in the stock in next 3-4 Months.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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