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Jamna Auto Industries

Will achieve 15% topline growth in Q4: Jamna Auto. In an interview to CNBC-TV18, Vivek Bhatia, CFO of Jamna Auto spoke Q4 and his outlook for the company.

Read more at:
Disclosure:-- invested.

Promoters again increases their stake in co… from 46.45% on Dec’2015 to 48…01% on March’16…:ok_hand:


Q4FY16 Results:

Optically, the results look exceptional, but Edelweiss says the topline growth was below their estimates.;-Result-Update-Q4FY16/10007403.html

Higher parabolic segment mix & lower lift axle segment growth pulls down topline growth

Jamna Auto Industries (JAI) reported a lower than expected topline growth of 7% YoY. Implied volume growth was lower than expected at ~9% YoY in Q4FY16 vis a vis 32% MHCV production growth. Significantly higher growth from lighter parabolic leaf spring business and slowdown in growth levels of lift axle business led to lower volume growth. Additionally, JAI reported a overall net realization decrease of 2% YoY majorly due to partial steel price pass-on offset by higher realization of parabolic leaf springs. For FY16, JAI’s revenue growth was around 14% YoY as strong MHCV Industry growth negated significant amount of steel price pass-on to the OEM customers. Within the MHCV industry, the growth in the >26 tonne segment continues to gain traction which has augured well for the lift axle segment in FY16. In the event of change in the product mix that would curtail volume growth in leaf spring business and slowdown expected in growth levels of lift axle business, we have cut our topline estimates for FY17/FY18 by 562/322 bps. However, keeping in mind significant improvement expected in realisation, we are revising our bottomline estimates upward.

Profitability propelled by gross margin expansion

EBITDA for the quarter was bolstered by a significant increase in gross profit. The company reported a stellar gross margin expansion of 540 bps YoY as a result of raw material price decline benefit as well as improvement in parabolic sales mix. Significant 270 bps improvement was also observed on QoQ basis. Employee costs & Other expenses combined as a percentage of sales rose by ~ 133 bps on a YoY basis. For FY16 , Gross margins & EBITDA margins have improved by 513 bps YoY & 340 bps YoY respectively. Going forward, we expect scope of ~100 bps improvement in EBITDA margins increasing mix of parabolic leaf springs and lift axle segment as well as operating leverage benefit for the leaf spring segment.

People tracking this stock are requested to share their opinion on the latest results. Also, when will the 2015-16 annual report be available?

Disclosure: Invested


To me the results do look good

The Net profit has almost doubled as compared to its last quarter and even if we compare it with the same quarter last year.

Their operating margin has seen an improvement of almost 500 bps.
This may be because of their foray into the comparatively higher margin Axles and Suspension.
However in the results the details are not their that which section contributed how much to the sales.
Their Annual report will have these details and will be interesting to Read.
One more thing their inventory have increased quite a lot in this quarter almost 30 Cr need to dig out the reason for this as well.

Disclosure: 3.5 % of my portfolio and will be staying put in it.

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In view of significantly increased volumes of trading today, the exchange had written to the company to provide any relevant reason. The reply from the company is here:

They have mentioned that there was an investor analyst meet on 1st June. Apart from that, there has been no specific information that they have to share. Does this imply that following good results and considering the future, it would have generated interest in buying this stock, since it follows an investor analyst meet? Or just a coincidence, nothing more?

Kind of funny that the analysts were so impressed/ depressed by the presentation that most of them took less than a day to trade in the stock! :slight_smile:

Nothing new in the article than what is mentioned in the company presentation. just posting.

@smehta Regarding replacement market i have the following thoughts:

  1. I have my doubts regarding quality of spring produced in a house in Ludhiana as its a piece of engineering which require heating, melting and hammering. Durability should be correlated with process.
  2. Roads might be good in Gujarat but not in UP and Bihar (mining industry). So there is always a market.
  3. My family is in extraction of sand and boulders and I know springs break quite often. Though we don’t use branded one.
  4. There program to reach drivers and mechanics and educate them about benefit of quality product will help them.
  5. GST may also be helpful in providing them level playing field with local players due to correction in tax anomalies.
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Company financials are excellent, valuation is also reasonable. Profits have increased dramatically this year; company has paid off debt and has become virtually debt free. Working capital is negative, which is a pleasant surprise given that the company caters to customers who are larger and financially stronger. Sales growth, margins – are all very good.

However, there are some concerns. The promoters are taking away too much of money. This year, promoters have taken home Rs.10 crores as commission (on a PAT of Rs.71 crore). PAT till last year was not even Rs.30 crore. Among tax litigation, company has cases of Rs. 12 crore on “alleged diversion of profit to subsidiary” and “alleged unaccounted income” – disputed by the company of course, and disclosed in Annual Report. Company has also incurred capex in SIPCOT, Tamil Nadu where clearances have not been received.

Discl.: Invested


Concerns seem misplaced:

On the promotors commission of Rs 10 Crores : I find the figure at INR 7.0 crores paid to 2 whole time directors in total. It is a percentage based on profits ( company performance linked). It is not a fixed commission irrespective of profits, hence shareholders are better off in the long run.

On Tax Litigation: Even if entire Tax related contingent liability of Rs 14.27 crores (consolidated 2015-16 financial statements) is paid of in one year, the net cash generate from operations (Rs 137.92 crores) is more than sufficient. Hence this contingent liability is not material. If it was taken onto the Balance Sheet, the leverage being already low would continue to remain acceptable.


You are missing the point.

Total remuneration taken home by the promoters is Rs.9.97 crore (see page 120 of AR). Though commission is linked to profits, other promoters take less. This amount is comparatively on the higher side. Also, profit linked commission provides an incentive to a promoter to inflate the numbers, which a fixed salary does not. I would rather prefer promoters take dividends or capital appreciation which are much more equitable.

Similarly, the tax claim may be small, but the nature of allegation is serious. If there is any truth in it, who guarantees that there is no third instance of a much higher value hidden elsewhere?

I have said these are just some concerns on an otherwise excellent fundamentals.

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Sir, My objective is not to enter into an argument but to understand the real concerns from the financials. Therefore, this will be my last response on the subject:

  1. Your concern was initially expressed on commission paid to promotors and not total remuneration.
  2. Other promotors taking less or more is not relevant in this situation. The regulatory cap identified on page 30 of the the annual report is what is relevant in the context of total remuneration paid to each of the 2 whole time directors. Actual paid was within the cap.
  3. Risk of inflation of numbers is partly mitigated by the quality of the auditors.
  4. Promotors are getting return by capital appreciation of their promotor holding which has also gone up in terms of number of shares also from 43.81% to 46.45% in last approx 7 months in addition to the companies market cap.
  5. Tax allegations and resulting contingent claims made are not uncommon.

    So based on available info., I am not really concerned.

I feel Jamna Auto is overvalued at this price. Also with both AL and TM are showing weakness in MHCV numbers in July, one is needed to be careful

Sales and Net profit are increasing, EBITDA Margin is improving, Interest cost is declining, ROE is increasing, Promoters’ Holding is increasing, Debts are reducing… and company is trading at significant discount to other CV Suppliers like AUTOMOTIVE AXLES, WABCO, and Z F STEERING, even if having better Financials and Ratios. So, re-rating in valuations of JAMNA AUTO may happen soon. Financials are

Disclosure:-- invested.

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You forget to mention negative working capital,debt free & Payout increasing😃

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According to Phillip Capital’s Monthly Auto Sales Report , MHCV sales are weak because the construction activity is down due to heavy rainfall.

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Jamna Auto Industries: Spring in its step

It’s a month old article, but gives a decent overview of the company and its clients.

Q2 Results

Short term borrowings on 30.9.2016 stands at 150.7 Cr vs. 4.35 Cr on 31.03.2016.

If the year end pre-buying of CVs for BS IV gets postponed for the arrival of GST, FY17 numbers might not show much growth.

Disclosure: Invested

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@VIFL Thank you for sharing your thoughts.

I am in agreement with your assessment. Along with GST factor, the demonetization will have impact on construction sector and hence overall MHCV sales which were expected to pick up post monsoon will not happen.
However this short term growth blip may provide good opportunity to enter at lower levels.

Disclosure: Invested (very small position)

Jamna Auto Industries Q2 Earnings presentation
Views/ Explanations on Jamna Auto’s working capital loans would be greatly appreciated :slight_smile: