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Q4FY12 Results to improve tremendously!!!
Jay Bharat Maruti Limited (JBML) is a joint venture between JBM Group and Maruti Suzuki with Maruti holding a 29.38% stake. JBML is a key supplier to Maruti Suzuki India Ltd (Maruti Suzuki) and garners around 90-92% of its total revenues from Maruti Suzuki. Its other customers are Eicher Motors and Mahindra and Mahindra.
Positive correlation with Maruti Suzuki
As JBML generates approximately 90% of its revenues from Maruti Suzuki, the performance of JBML largely depends on the performance of Maruti Suzuki. We have seen a strong correlation in the volume growth between Maruti Suzuki and JBML. JBML sales are approximately around 3% of Maruti sales.
The Past: What went wrong
When Maruti was passing through a rough phase owing to large scale labour unrest resulting from prolonged strike which impacted the performance of the company, even JBML performance was hit as it is largely dependent on Maruti for sales.
The Future: Q4FY12 results expected to be good
Maruti Suzuki showed a feeble performance over the past couple of quarters which was adversely affected by the prolonged labour strike at the Manesar plant that hit the company’s production. Going forward, we expect the sales of Maruti to improve and witness significant improvement in Q4FY12E. As JBML is largely dependent on Maruti (around 90% of sales are to Maruti), an improvement in sales of Maruti will result in an improvement of sales for JBML as well. With expected improvement in sales to Maruti, JBML will be able to leverage its fixed cost more and will be able to improve margins.
Valuation & Recommendation
Although the stock price of Maruti has factored in the anticipated positive results, the same is not the case with JBML. The stock of Maruti has generated returns of 41% from Jan to March 2012 whereas the stock of JBML has generated return of only 11% over the same period. We believe that this was owing to small size of the company and low volume in stock.
Going forward, we believe that the company will be back on growth path and demonstrate a healthy performance. At CMP of Rs 43 the stock is trading at an annualized PE of mere 3.2x based on Q4FY12E EPS of Rs. 3.4. We believe that the stock will perform in the near term resulting from direct benefit from Maruti and can be accumulated at current levels with a potential upside of 15%-20% in near term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q4FY12 Results to improve tremendously!!!
Jay Bharat Maruti Limited (JBML) is a joint venture between JBM Group and Maruti Suzuki with Maruti holding a 29.38% stake. JBML is a key supplier to Maruti Suzuki India Ltd (Maruti Suzuki) and garners around 90-92% of its total revenues from Maruti Suzuki. Its other customers are Eicher Motors and Mahindra and Mahindra.
Positive correlation with Maruti Suzuki
As JBML generates approximately 90% of its revenues from Maruti Suzuki, the performance of JBML largely depends on the performance of Maruti Suzuki. We have seen a strong correlation in the volume growth between Maruti Suzuki and JBML. JBML sales are approximately around 3% of Maruti sales.
The Past: What went wrong
When Maruti was passing through a rough phase owing to large scale labour unrest resulting from prolonged strike which impacted the performance of the company, even JBML performance was hit as it is largely dependent on Maruti for sales.
The Future: Q4FY12 results expected to be good
Maruti Suzuki showed a feeble performance over the past couple of quarters which was adversely affected by the prolonged labour strike at the Manesar plant that hit the company’s production. Going forward, we expect the sales of Maruti to improve and witness significant improvement in Q4FY12E. As JBML is largely dependent on Maruti (around 90% of sales are to Maruti), an improvement in sales of Maruti will result in an improvement of sales for JBML as well. With expected improvement in sales to Maruti, JBML will be able to leverage its fixed cost more and will be able to improve margins.
Valuation & Recommendation
Although the stock price of Maruti has factored in the anticipated positive results, the same is not the case with JBML. The stock of Maruti has generated returns of 41% from Jan to March 2012 whereas the stock of JBML has generated return of only 11% over the same period. We believe that this was owing to small size of the company and low volume in stock.
Going forward, we believe that the company will be back on growth path and demonstrate a healthy performance. At CMP of Rs 43 the stock is trading at an annualized PE of mere 3.2x based on Q4FY12E EPS of Rs. 3.4. We believe that the stock will perform in the near term resulting from direct benefit from Maruti and can be accumulated at current levels with a potential upside of 15%-20% in near term.
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