Dolat Capital's research report on JBM Auto
JBM Auto (JBMA)’s reported strong operating margin at 11.6% (+39bps YoY) amid challenging environment led by better product mix (increase in revenue from tooling and bus division) and cost control measures. Net revenue fell by 21% YoY to Rs. 4.75bn led by de-growth in component division (-38% YoY) was partially compensated by ramp up in the bus business and a robust growth in the tooling business. The company is taking various cost optimization initiative such as reduction in manpower cost (Shift management) and administrative overhead to protect the margin. The bus division, which was a drag (Rs.118 & Rs.46mn losses at EBIT level in FY18 & FY19 respectively) earlier turned profitable in FY20 to Rs. 98.4mn at EBIT level. We expect the company to be a key beneficiary of increasing demand of EV buses. We expect bus division continue to deliver strong performance in coming year on the back of strong order book of 500 buses (including 350 electric buses). JBM Auto’s growth story is premised on 1) slowdown in PVs volume would be partially offset by new order wins in the sheet metal business 2) encouraging revenue potential in the tooling business (high margin +30%), given rising localization and outsourcing of tooling requirements by large global OEMs (cost-benefit of 25% in India); and 3) increasing economies of scale in the CNG bus manufacturing business and new orders EV Buses.
Outlook
The stock is currently available at 15/10x for FY21/22E. We value the stock Rs 309 (based on 15xFY22E EPS). Recommend BUY.
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