As of today, I have switched my 1% position in IEX to Jamna auto. Jamna is a play on MHCV cycle (which currently hasn’t revived to FY19 levels). However, if we look back, company has managed to double sales across cycles.
- FY12 peak sales were 1’120 cr. on fixed assets of 185 cr. (Fixed asset turn ~ 6x)
- FY19 peak sales were 2’135 cr. on fixed assets of 373 cr. (Fixed asset turn ~ 5.7x)
I expect CV cycle to revive sometime in the next 5-years and here are my very very naive projections.
Sales double to ~4000 cr., EBITDA margins vary from 13-16% (implying EBITDA of 520-640 cr.), EV (on a 10x EV/EBITDA) ~ 5200 – 6400 cr.; Assuming 100 cr. debt, Mcap ~ 5100 – 6300 cr. (share price: 130-160).
The reason I have not assumed higher debt is because internal accruals (in a normalized year) can easily fund fixed capex requirement. Incremental fixed asset investment over next 5-years comes out to be 350-360 cr. to increase sales to 4’000 cr. (5.5x fixed asset turns), implying 70-75 cr. annualized CAPEX. Annualized average CFO over last 5-years was ~120 cr. Also, working capital investments are negligible given company has cash conversion cycles varying from -ve to 20 days, which is also why Jamna has been able to pay 30% of profits as dividends without any dilution in last 5-years. Lets see if the cycle plays out! Updated portfolio is below.
Companies | Weightage |
---|---|
HCL Technologies Ltd. | 6.00% |
I T C Ltd. | 6.00% |
PI Industries Ltd. | 6.00% |
Power Grid Corporation of India Ltd. | 6.00% |
Larsen & Toubro Ltd. | 6.00% |
Ajanta Pharmaceuticals Ltd. | 4.50% |
Kolte-Patil Developers Ltd. | 4.50% |
Ashiana Housing Ltd. | 4.50% |
NESCO Ltd. | 4.50% |
InterGlobe Aviation Ltd. | 4.00% |
Maruti Suzuki India Ltd. | 4.00% |
Suprajit Engineering Ltd. | 4.00% |
Manappuram Finance Ltd. | 4.00% |
Housing Development Finance Corporation Ltd. | 3.00% |
HDFC Asset Management Company Ltd | 3.00% |
Reliance Nippon Asset Management Co | 3.00% |
CARE Ratings Ltd. | 3.00% |
Lupin Ltd. | 2.00% |
Avanti Feeds Ltd. | 2.00% |
Cera Sanitaryware Ltd | 2.00% |
Infosys Ltd. | 2.00% |
National Aluminium Co. Ltd. | 2.00% |
NATCO Pharma Ltd. | 2.00% |
Wonderla Holidays Ltd. | 2.00% |
Maithan Alloys Ltd. | 2.00% |
Cadila Healthcare Ltd. | 2.00% |
Inox Leisure Ltd. | 2.00% |
Jubilant Ingrevia Ltd | 2.00% |
Jamna Auto Industries Ltd. | 1.00% |
Ashok Leyland Ltd. | 1.00% |
Cash | 0.00% |