RESULTS REVIEW 3QFY17 17 FEB 2017

Jamna Auto
BUY
INDUSTRY AUTOS Positive potential
CMP (as on 16 Feb 2017) Rs 198 Jamna Autos (JMNA) 3QFY17 EBITDA margins at Highlights of the quarter
12.5% (-20 bps YoY) were above estimates, despite
Target Price Rs 249 the effect of demonetisation during the quarter. Volume growth continues: JMNA has achieved 12%
Nifty 8,778 Operating leverage gains and a richer mix (parabolic growth in volumes YoY in 3QFY17 (weak macro
springs) aided the sharp margin expansion on. Gross environment) led by 17% YoY growth in the OEM
Sensex 28,301
margins contracted by 294bps YoY led by sharp rise segment, while replacement was down 9% YoY.
KEY STOCK DATA
in steel prices. Net sales at Rs 3.1bn (+9% YoY) were Management is confident of increasing its replacement
Bloomberg JMNA IN
above estimates, owing to 12% YoY volume growth. share with GST coming into play and is taking steps to
No. of Shares (mn) 80
We believe that the growth story of JMNA is intact, support that viz giving incentives to dealers and
MCap (Rs bn) / ($ mn) 16/235 reaching out to local garages.
with a visibly strong margin trajectory driven by
6m avg traded value (Rs mn) 57
healthy CV demand, steady improvement in market Capex: The Hosur plant expansion has been
STOCK PERFORMANCE (%)
share (70% in 9MFY17 vs. 67% in FY16) and a rich completed. The plant has an annual capacity of 30k
52 Week high / low Rs 241/115 product mix with a higher share of parabolic springs
tonnes, taking the total capacity to 210k tonnes.
3M 6M 12M (22% in 9MFY17 vs. 21% in FY16). With the possibility
Capacity utilisation stands at 70%. JMNA may increase
Absolute (%) (7.0) 0.6 43.0 of GST being implemented by Sept-17, the price
differential between organised and unorganised the capacity of parabolic springs to keep up with
Relative (%) (10.8) (0.1) 25.2
players will disappear, creating a level playing field. increasing demand.
SHAREHOLDING PATTERN (%)
Promoters 47.88 We cut FY17/18E estimates by ~9% to factor in Near-term outlook: Management has indicated
FIs & Local MFs 2.34 aftermath of demonetisation on the replacement volume growth of 5-10% in 4Q for CVs, resulting in
FPIs 5.88 market and introduce FY19 estimates. Maintain BUY volumes of 40k tonnes for JMNA. However, the
with TP of Rs 249 based on 15x Dec-18E. replacement market could take time to stabilise.
Public & Others 43.90
Source : BSE Financial Summary (Consolidated)
(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY16 FY17E FY18E FY19E
Net Sales 3,057 2,816 8.5 2,753 11.0 12,558 13,826 15,529 17,472
Sneha Prashant EBITDA 382 358 6.6 349 9.5 1,566 1,848 2,171 2,676
sneha.prashant@hdfcsec.com PAT 209 155 34.9 210 (0.6) 715 881 1,051 1,408
+91-22-6171-7336 Diluted EPS (Rs) 2.6 1.9 34.9 2.6 (0.6) 9.0 11.1 13.2 17.7
P/E (x) 22.0 17.8 14.9 11.2
Abhishek Jain EV / EBITDA (x) 10.1 8.5 7.2 5.5
abhishekkumar.jain@hdfcsec.com RoE (%) 32.5 31.5 30.1 33.0
+91-22-6171-7320 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 JAMNA AUTO : RESULTS REVIEW 3QFY17

Quarterly Financials Snapshot

JMNAs topline came in (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
above expectations owing to Net Sales 3,003 2,775 8.2 2,706 11.0
12% YoY growth in volumes, Other Operating Income 53 41 29.5 47 13.1
despite 3% YoY drop in net Net sales (incl OOI) 3,057 2,816 8.5 2,753 11.0
ASPs Material Expenses 1,899 1,667 13.9 1,558 21.9
Employee Expenses 263 246 6.8 267 (1.4)
Power & Fuel 141 156 (9.6) 176 (19.9)
EBITDA margin at 12.5% Stores & Spares 95 107 (11.2) 115 (17.7)
surprised positively on Other Operating Expenses 277 283 (1.9) 289 (3.9)
account of strong operating EBITDA 382 358 6.6 349 9.5
leverage benefits Depreciation 95 127 (24.9) 112 (14.5)
EBIT 286 231 23.9 237 20.8
Other Income 56 27 106.8 55 2.4
Interest Cost 19 38 (49.7) 23 (17.7)
PBT 324 221 46.7 269 20.4
Tax 115 66 74.7 59 94.8
Expansion at Malanpur and APAT 209 155 34.9 210 (0.6)
Hosur is completed and the Adj EPS 2.6 1.9 34.9 2.6 (0.6)
company is awaiting certain Source: Company, HDFCsec Inst Research
approvals to commercialise
the same Margin Analysis
3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps)
Material Expenses % Net Sales 62.1 59.2 294 56.6 554
Employee Expenses % Net Sales 8.6 8.8 (14) 9.7 (109)
Power & Fuel Expenses % Net Sales 4.6 5.5 (92) 6.4 (178)
Stores & Spares % Net Sales 3.1 3.8 (69) 4.2 (108)
Other Operating Expenses % Net Sales 9.1 10.0 (96) 10.5 (141)
EBITDA Margin (%) 12.5 12.7 (23) 12.7 (17)
Tax Rate (%) 35.5 29.8 568 21.9 1,357
APAT Margin (%) 6.8 5.5 133 7.6 (80)
Source: Company, HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Key Assumptions
FY15 FY16 FY17E FY18E FY19E
We cut our volume estimates Leaf Spring OEM Volumes (in MT) 7,958 8,940 9,857 10,951 12,167
by 5-8% in the OEM segment % YoY 34.2 12.3 10.3 11.1 11.1
in FY17/18E Leaf Spring Non-OEM Volumes* (in MT) 2,180 2,254 2,408 2,702 3,170
% YoY 10.5 3.4 6.8 12.2 17.3
Lift Axles ( Incl Other Products) 461 1,085 1,194 1,373 1,510
% YoY 187.5 135.2 10.0 15.0 10.0
Exports (Rs mn) 108 91 160 275 375
% YoY 36.0 (16.3) 76.8 71.7 36.4
Source: Company, HDFC sec Inst Research *Non-OEM includes sales to Aftermarket + STU + VFJ + SPD

Change In Estimates
New Old % chg
We cut our FY17-18E In Rs mn
FY17E FY18E FY17E FY18E FY17E FY18E
earnings estimates by 13-
Net Sales 13,826 15,529 14,514 16,572 (4.7) (6.3)
15% to factor in weak
EBITDA 1,848 2,171 1,976 2,336 (6.5) (7.1)
volumes due to demonet
Adj PAT 881 1,051 964 1,158 (8.6) (9.2)
Adj EPS (in Rs) 11.1 13.2 12.1 14.6 (8.6) (9.2)
Source: HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Stronger Growth In LCVs Strong OEM Leaf Spring Demand

LCV ('000) MHCV ('000)
The management indicated In '000 tonnes
% YoY - LCV (RHS) % YoY - MHCV (RHS) 44
that it continues to witness 42
130.0 48.0 40
strong growth from MHCVs 40 38
38.0
and LCVs in the OEM 115.0 36
35
28.0 36
segment. In 4QFY17, it has 33 33
100.0 31
indicated 5-10% volume 18.0 32 30
growth for the industry 85.0 8.0
28
(2.0)
70.0 24
(12.0)
JMNA improved its market 55.0 (22.0) 20
share sharply during the
3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17
quarter and currently stands
at 73%
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Lower Net ASPs Impacted Topline Growth EBITDA Margins At Historical High
Net Sales (Rs Mn) % YoY (RHS) EBIDTA (Rs Mn) EBIDTA Margin % (RHS)

Pass through of material 3,750 16.0

55.0 550
price deflation impacted net 3,500 14.0
45.0
ASP by ~5% in the quarter 3,250 450 12.0
35.0
10.0
3,000 350
25.0 8.0
EBITDA margin was stable 2,750 15.0 250 6.0
despite raw material prices 2,500 5.0 4.0
moving up, led by strong 150
2,250 -5.0 2.0
operating leverage 2,000 -15.0 50 -

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17
3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Market Share Expands Substantially One-year Forward P/E Chart

JMNAs OEM market share 80 P/E Avg P/E +1 SD -1 SD
70 16.0
rose sharply in 9MFY17 to 70 64
67
60 60
70%, on account of the 60 57
increasing share of business 14.0
50
and improving mix of
40
parabolic springs (JAI has 12.0
~95% market share) 30
20 10.0
10
- 8.0

FY12

FY13

FY14

FY15

FY16

9MFY17

Feb-15

Sep-15

Feb-16

Sep-16

Feb-17
Mar-16
Jun-15

Dec-15

Jun-16

Dec-16
Aug-15

Aug-16
Apr-15
May-15

May-16
Nov-15

Nov-16
Source: Company, HDFC sec Inst Research Source: Company, Bloomberg, HDFC sec Inst Research

Peer Valuation
Mcap CMP Adj EPS (Rs/sh) P/E (x) EV/EBITDA (x) RoE (%)
Rating TP
(Rs bn) (Rs/sh) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E
Bharat Forge 252 1,081 NEU 943 24.8 31.0 40.0 43.7 34.9 27.0 19.5 16.9 13.8 15.6 17.5 19.6
Exide Industries 179 210 BUY 223 8.3 9.1 10.8 25.2 23.2 19.5 15.9 14.3 13.0 17.5 21.9 21.6
Balkrishna Industries 113 1,169 NEU 1,152 65.8 76.6 84.2 17.8 15.3 13.9 9.5 8.3 7.7 31.4 31.7 30.8
Suprajit Engineering 27 208 BUY 231 8.4 11.1 14.6 24.9 18.7 14.3 14.2 10.9 8.8 23.2 24.8 26.0
Jamna Auto 16 198 BUY 249 11.1 13.2 17.7 17.8 14.9 11.2 8.5 7.2 5.5 31.5 30.1 33.0
Ramkrishna Forgings 11 396 BUY 474 8.3 24.4 37.0 47.8 16.2 10.7 11.6 8.2 6.7 4.9 13.4 17.8
Subros 11 187 NR - 5.9 10.0 13.8 31.9 18.7 13.5 9.1 6.8 5.4 10.1 15.7 19.3
Lumax Autotech 5 443 BUY 673 27.3 37.4 45.4 16.2 11.8 9.7 7.1 5.2 4.2 12.6 15.5 16.6
Source: Company, HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Income Statement Balance Sheet

(Rs mn) FY15 FY16 FY17E FY18E FY19E (Rs mn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 10,951 12,558 13,826 15,529 17,472 SOURCES OF FUNDS
Growth (%) 31.4 14.7 10.1 12.3 12.5 Share Capital - Equity 396 397 397 397 397
Material Expenses 7,351 7,936 8,545 9,550 10,658 Share Capital - Preference - - - - -
Employee Expenses 689 943 1,075 1,183 1,282 Reserves 1,576 2,031 2,774 3,433 4,315
Other Operating Expenses 1,966 2,113 2,359 2,625 2,857 Total Shareholders Funds 1,972 2,429 3,171 3,830 4,712
EBITDA 946 1,566 1,848 2,171 2,676 Long-term Debt 633 68 62 62 62
EBITDA Margin (%) 8.6 12.5 13.4 14.0 15.3
Short-term Debt 10 44 43 43 43
EBITDA Growth (%) 96.1 65.6 18.0 17.5 23.3
Total Debt 643 111 105 105 105
Depreciation 311 452 557 642 662
Net Deferred Taxes 159 57 57 57 57
EBIT 635 1,114 1,291 1,529 2,014
Long-term Provisions & Others 46 57 65 74 86
Other Income (Including EO
20 83 138 158 213 TOTAL SOURCES OF FUNDS 2,820 2,653 3,397 4,066 4,959
Items)
Interest 180 147 132 141 157 APPLICATION OF FUNDS
PBT 475 1,050 1,296 1,546 2,070 Net Block 2,420 2,107 3,049 3,607 3,545
Tax (Incl Deferred) 180 335 415 495 662 CWIP 90 749 250 100 50
RPAT 295 715 881 1,051 1,408 Investments - - - - -
EO (Loss) / Profit (Net Of LT Loans & Advances 387 313 448 492 540
- - - - -
Tax) Total Non-current Assets 2,897 3,169 3,747 4,199 4,136
APAT 295 715 881 1,051 1,408 Inventories 1,091 1,074 1,136 1,319 1,484
APAT Growth (%) 112.8 142.8 23.2 19.3 33.9 Debtors 564 376 398 468 574
Adjusted EPS (Rs) 3.7 9.0 11.1 13.2 17.7 Other Current Assets 287 141 155 170 187
EPS Growth (%) 112.2 142.2 23.2 19.3 33.9 Cash & Equivalents 107 80 141 194 1,166
Source: Company, HDFC sec Inst Research
Total Current Assets 2,049 1,671 1,830 2,150 3,411
Creditors 1,827 1,564 1,705 1,744 1,915
Other Current Liabilities & Provns 299 623 475 539 673
Total Current Liabilities 2,127 2,187 2,180 2,284 2,588
Net Current Assets (78) (516) (350) (133) 824
TOTAL APPLICATION OF FUNDS 2,820 2,653 3,397 4,066 4,959
Source: Company, HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Cash Flow Key Ratios

(Rs mn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 474 1,050 1,296 1,546 2,070 PROFITABILITY (%)
Non-operating & EO items 34 - - - - GPM 32.9 36.8 38.2 38.5 39.0
Interest expenses 104 147 132 141 157 EBITDA Margin 8.6 12.5 13.4 14.0 15.3
APAT Margin 2.7 5.7 6.4 6.8 8.1
Depreciation 311 452 557 642 662
RoE 15.6 32.5 31.5 30.1 33.0
Working Capital Change 165 495 (231) (199) (22) RoIC (or Core RoCE) 13.3 27.1 27.5 26.7 32.6
Tax Paid (107) (335) (415) (495) (662) RoCE 13.6 30.4 32.8 31.3 34.2
OPERATING CASH FLOW ( a ) 981 1,810 1,340 1,635 2,205 EFFICIENCY
Capex (227) (797) (1,001) (1,050) (550) Tax Rate (%) 37.9 31.9 32.0 32.0 32.0
Free Cash Flow (FCF) 754 1,013 339 585 1,655 Fixed Asset Turnover (x) 2.3 2.6 2.5 2.2 2.2
Investments 6 - - - - Inventory (days) 36.4 31.2 30.0 31.0 31.0
Non-operating Income - (102) 0 0 0 Debtors (days) 18.8 10.9 10.5 11.0 12.0
INVESTING CASH FLOW ( b ) (221) (900) (1,001) (1,050) (550) Other Current Assets (days) 9.6 4.1 4.1 4.0 3.9
Payables (days) 60.9 45.5 45.0 41.0 40.0
Debt Issuance/(Repaid) (628) (532) (6) - -
Other Current Liab & Provns
Interest Expenses (99) (147) (132) (141) (157) 10.0 18.1 12.5 12.7 14.1
(days)
FCFE 27 334 200 445 1,498 Cash Conversion Cycle (days) (6.2) (17.3) (13.0) (7.7) (7.2)
Share Capital Issuance (11) 9 193 - - Debt/EBITDA (x) 0.7 0.1 0.1 0.0 0.0
Dividend (47) (263) (329) (392) (525) Net D/E (x) 0.3 0.01 (0.0) (0.0) (0.2)
FINANCING CASH FLOW ( c ) (784) (933) (275) (533) (682) Interest Coverage (x) 3.5 7.6 9.8 10.9 12.8
NET CASH FLOW (a+b+c) (24) (22) 64 52 973 PER SHARE DATA (Rs)
EO Items, Others 21 (5) (3) EPS 3.7 9.0 11.1 13.2 17.7
CEPS 7.6 14.7 18.1 21.3 26.0
Closing Cash & Equivalents 107 80 142 194 1,167
Dividend 1.1 2.8 3.4 4.1 5.5
Source: Company, HDFC sec Inst Research
Book Value 24.9 30.6 39.9 48.2 59.3
VALUATION
P/E (x) 53.6 22.1 18.0 15.1 11.2
P/BV (x) 8.0 6.5 5.0 4.1 3.4
EV/EBITDA (x) 17.3 10.1 8.5 7.3 5.5
EV/Revenues (x) 1.5 1.3 1.1 1.0 0.8
OCF/EV (%) 6.0 11.4 8.5 10.4 14.9
FCF/EV (%) 4.6 6.4 2.1 3.7 11.2
FCFE/Mkt Cap (%) 0.2 2.1 1.3 2.8 9.5
Dividend Yield (%) 0.6 1.4 1.7 2.1 2.8
Source: Company, HDFC sec Inst Research

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

RECOMMENDATION HISTORY
Date CMP Reco Target
Jamna Auto TP
260
1-Feb-16 145 BUY 183
240 8-Feb-16 141 BUY 185
220 24-May-16 148 BUY 192
200 9-Aug-16 199 BUY 222
180
17-Feb-17 198 BUY 249
160
140
120
100
80
60 Rating Definitions
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Aug-16
Apr-16

Jan-17
Feb-16

Jul-16

Sep-16

Feb-17
Nov-16
Jun-16
May-16

Dec-16
Mar-16

Oct-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 JAMNA AUTO : RESULTS REVIEW 3QFY17

Disclosure:
We, Sneha Prashant, MBA & Abhishek Jain, MBA authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No

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Board : +91-22-6171 7330www.hdfcsec.com

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