HDFC Securities has a buy call on JBM Auto with a target price of Rs 560.The current market price of JBM Auto is Rs 360.15.Time period given by the brokerage is one year when JBM Auto price can reach the defined target.The view of HDFC Securities on the company:JBMA recorded strong PAT growth(+26 per cent YoY, +40 per cent including amalgamation effect) led by jump in JVs (JBM MA Automotive ltd) profit driven by new business of Jeep compass(Fiat) and Yaris (Toyota).
Consolidated Revenue (Standalone+JBMAS) rose 11 per cent to Rs.
4.2bn led by strong growth in tool room division (+225 per centYoY) marginally offset by muted growth in sheet metal component division (+5 per cent YoY).
EBITDA grew 10 per cent YoY to Rs 513mn with margin at 12.2 per cent(-21bps YoY) impacted by fall in revenue from FORD in sheet metal division.
We believe, JBMAs core sheet metal business (body-inwhite and chassis) will continue to deliver strong earing growth helped by 1) Accelerated growth in PV's segment, 2) Increasing revenue from, Tata Motors, MM, RE, HMSI, Fiat and VECV, 3) benefits of oplev.
Also, strong order book of tooling division business will boost margin and profitability.
Moreover, recent amalgamation of its subsidiary JBMAS and JV JBMMA into a single entity will be synergetic and EPS accretive.
We reckon 35 per cent PAT CAGR over FY18-FY20E; fuelled by improving operating leverage, richer product mix and acquisition of new clients.
We value stock at Rs.
560 (18x FY20E EPS) and maintain BUY.