COMPANY UPDATE 06 MAR 2018

JBM Auto BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

Strengthening the core JBM Auto (JBMA), which makes sheet metal (body-in-white and chassis), tools and dies is likely to continue delivering strong earnings growth, helped by i) faster growth in PV's segment, ii) growing revenue pie from Ford, Tata Motors, M&M, RE and VECV, and iii) benefits of oplev. During 9MFY18, consolidated EBITDA and APAT jumped 20/23%, respectively owing to strong traction in its core business (sheet metal) and revival of JVs profitability (especially from MA Automotive owing to acquisition of new business of Jeep Compass from Fiat). Strong volume growth of HCIL (Honda cars), M&M, Tata Motors, Ford India and traction in CV segment from M&M, Ashok Leyland and Volvo Eicher are likely to remain the key growth driver.

Robust PV segment growth coupled with rise in capacity utilisation at its plants (Indore, Pathredi, Sanand), bode well for company’s revenues and earnings growth. Also, strong order book of tooling division business will boost profitability. Moreover, proposed amalgamation of its subsidiary JBMAS and JV JBMMA into a single entity will be synergetic and EPS accretive. We reckon 31% PAT CAGR over FY17-FY20E; fuelled by improving operating leverage, richer product mix and acquisition of new clients. We value the stock Rs. 560 (18x FY20E EPS) and recommend to BUY.

Key highlights Core business: JBMA is gearing up to utilise its

capacity to the fullest in the sheet metal division led by rising sales graph of Ford, Tata Motors, HCIL and M&M. During 9MFY18, consolidated revenue from sheet metal business increased by 10% YoY and EBIT

jumped by 35% YoY. We believe increasing utilization at the (Indore, Pathredi, Sanand), plant will add significantly to revenues/PAT.

Tooling division: Although, revenue from the tooling division fell 25% in 9MFY18, we see strong revival in FY19 backed by new launches and large orders secured in 3Q. This segment enjoys 3x higher margins vs the component segment.

Amalgamation is EPS accretive: The board of JBM Auto ltd (JBMA) approved the amalgamation of its subsidiary JBM Auto System Pvt Ltd (JBMAS, currently holds 73.89% share) and JV JBM MA Automotive Pvt Ltd (JBMMA, holds 50% share) with JBMA, subject to statutory approvals. Based on the swap ratio, the amalgamation will result in dilution of ~16% equity for JBM Auto, and promoter stake increases from 61.96% to 67.19%. Assuming, the deal gets all the statutory approvals, the impact of the deal will be EPS accretive as it adds 25% incremental profit annually.

Financial Summary (Consolidated) Y/E Mar (Rs. mn) FY16 FY17 FY18E FY19E FY20E Net Sales 15,178 17,902 20,301 22,888 25,776 EBITDA 1,901 1,916 2,456 2,861 3,299 APAT 514 538 867 1,172 1,475 Diluted EPS (Rs) 12.8 13.4 18.3 24.8 31.2 P/E (x) 33.5 32.0 23.5 17.3 13.8 EV / EBITDA (x) 11.8 11.7 9.3 8.8 7.5 RoE (%) 15.5 13.9 17.3 18.4 19.5 Source: Company, HDFC sec Inst Research,

INDUSTRY AUTOS

CMP (as on 05 Mar 2018) Rs 432

TP Rs 560

Nifty 10,359

Sensex 33,747

KEY STOCK DATA

Bloomberg JBMA IN

No. of Shares (mn) 41

MCap (Rs bn) / ($ mn) 18/271

6m avg traded value (Rs mn) 145

STOCK PERFORMANCE (%)

52 Week high / low Rs 629/259

3M 6M 12M

Absolute (%) (16.8) 5.6 57.8

Relative (%) (19.6) (0.2) 40.8

SHAREHOLDING PATTERN (%)

Promoters 61.96

FIs & Local MFs 0.37

FPIs 0.60

Public & Others 37.07

Source : BSE

Abhishek Jain abhishekkumar.jain@hdfcsec.com +91-22-6171-7320

JBM AUTO : COMPANY UPDATE

Page | 2

Consolidate business: Multiple levers for Revenue/PAT growth JBMA posted strong numbers in 9MFY18.

Consolidated Revenue at Rs. 11.85bn (+6% YoY) led by growth in sheet metal component division (+10% YoY), offset by fall in revenue from tool room and bus business. Despite 25% YoY fall in tool room division (high margin business) EBITDA jumped to Rs 1.45bn (+20% YoY) with improved margin of 12.3% (+140bps YoY) owing to rise in capacity utilization at its plants (Indore, Pathredi, Sanand). APAT grew 23% YoY to Rs. 503mn led by fall in interest cost and strong jump in its JVs profitability (especially from MA Automotive post of Jeep Compass from Fiat).

Recently, the company has also secured large orders for tool room business which will help to boost overall revenue for FY19E. We believe revival in tool business, new value-added products and rise in plant utilization (currently at ~70% on two shift basis) will help margin expansion in the coming years.

Revenue(Rs. Mn) 9MFY18 9MFY17 YoY (%) Component Division 11,167 10,162 10% Tool Room Division 545 728 -25% Bus Division 148 394 -62% Other 2 3 -35% Total 11,862 11,287 5% Inter segmental rev 8 121 -94% Total Revenue 11,854 11,166 6% EBIT Component Division 948 704 35% Tool Room Division 182 251 -28% Bus Division (71) (88) -19% Unallocated 80 210 -62% 1,140 1,079 6% EBIT Margin (%) YoY bps Component Division 8 7 156 Tool Room Division 33 35 -111 *Revenue-Standalone+ JBMAS

Particulars 9MFY18 9MFY17 YoY (%) Net Sales 11,854 11,166 6% Net sales (incl OOI) 11,854 11,166 6% Material Expenses 8,309 7,792 7% Employee Expenses 1,245 1,247 0% Other Operating Expenses 848 915 -7% EBITDA 1,453 1,213 20% Depreciation 417 364 15% EBIT 1,037 849 22% Other Income 103 119 -14% Interest Cost 358 405 -12% PBT 782 563 39% Add share of profit of JV 91 67 35% Tax 297 168 77% PAT Befor EO items 576 463 24% Minority Interest 73 55 33% RPAT after MI 503 408 23% EO Items 110 -100% RPAT Post EO items 503 518 -3% APAT 503 408 23% Adj EPS 12 10 23%

MARGIN ANALYSIS 9M FY18

9M FY17

YoY bps

Material Expenses % Net Sales 70.1 69.8 31

Employee Expenses % Net Sales 10.5 11.2 (67)

Other Operating Expenses % Net Sales 7.2 8.2 (104) EBITDA Margin (%) 12.3 10.9 140 Tax Rate (%) 38.0 29.8 821 APAT Margin (%) 4.2 3.7 59 Source: Company, HDFC sec Inst Research

The company has three main segments: Sheet Metal Division (SMD), Tool Room Division (TRD) and Buses. 9M Consolidated Revenue (standalone+ JBMAS) stood at Rs. 11.85bn (+6% YoY) Sheet metal component division increased by 10% in 9MFY18, offset by lower revenue from tool room division (-25%) and bus division (-62%) Margin expanded by 140bps YoY owing to oplev and cost control measures Increasing contribution from Ford, Tata Motor, M&M and VECV remains the key for earnings growth

JBM AUTO : COMPANY UPDATE

Page | 3

Amalgamation is EPS accretive The company has announced to merge its subsidiary

JBMAS (currently holds 73.89% stake) and JV JBMMA (50% stake) into parent company. JBMMA was the JV between Italy-based Magnetto Automotive group and JBM Auto. Recently, the company had announced that its Italian partner has sold its entire share in the company to Neel Metal (part of JBM group) and terminated the JV. Although, amalgamation will lead to 16% equity dilution, it will add significant incremental profit to bottom line (expected to add incremental 25% profit annually).

We believe the amalgamation will be value accretive and synergistic (in terms of saving Manpower, administrative and logistic cost). JBMMA plant is located at Chakan M.I.D.C., Pune, hence amalgamation will facilitate company to start supplying sheet metal parts to its other clients and save logistic cost.

Existing no. of shares of JBMAS(subs)mn 24.89 JBM Stake 73.89% Other stake 26.11% Swap Ratio 86:100 New JBMA shares to be issued, mn 5.59 Existing no. of shares of JBMMA, mn(JV) 60.88 JBM Stake 50.00% Other stake(Neel metal) 50% Swap Ratio 3:100 New JBMA shares to be issued, m 0.91 Existing number of shares of JBMA, mn 40.80 Revised number of shares - JBMA, mn 47.30 % increase in outstanding shares of JBMA 16%

Amalgamation is EPS Accretive

In Rs mn Post amalgamation Pre amalgamation %Chg FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Net Sales 20,301 22,888 25,776 16,243 18,688 21,110 25.0 22.5 22.1 EBITDA 2,456 2,861 3,299 1,965 2,336 2,702 25.0 22.5 22.1 Adj EPS (in Rs) 18.3 24.8 31.2 16.0 22.1 27.8 14.9 12.4 12.4

For FY17, the Sales/PAT of JBMAS were Rs. 8.4bn/250 mn, respectively

JBMA is issuing worth Rs 2.40bn (based on CMP Rs 430) mn share for acquisition of 26.11% stake of JBM. As per our calculation valuation comes at 19/16x for FY19/20E EPS, which looks fairly valued

During 9MFY18 JBMAS PBT jumped by 32% YoY.

For FY17, the Sales/PAT of JBMMA were Rs. 3.2bn/97 mn, respectively

JBMA is issuing worth Rs 393 mn (based on CMP Rs 430) share for acquisition of 50% stake of JBMMA , thereby valuation comes at 8/5x FY17/FY18 EPS, looks quite attractive

JBM AUTO : COMPANY UPDATE

Page | 4

Revenue To Grow At 13% CAGR Over FY17-20E EBITDA Margin To Improve Hereon

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

Debt And Interest Expenses Will Remain Higher ROE And ROCE To Improve In Coming Years

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

2,63

6

4,73

6

4,89

9

4,92

4

5,53

8

5,28

8

5,03

8

360 349

528 529 581 555 529

-

100

200

300

400

500

600

700

-

1,000

2,000

3,000

4,000

5,000

6,000

FY14

FY15

FY16

FY17

FY18

E

FY19

E

FY20

E

%Rs mn.

Debt (Rs Mn) Interest Cost (Rs Mn) - RHS

We estimate consolidated revenue to grow at CAGR of 13% over FY17-20E propelled by strong growth in the PV industry, consolidation of JV business and procuring new business from its existing clients

We estimate APAT to grow at 31% CAGR over FY17-20E, against 18% over FY13-FY17. This will be led by revenue CAGR of 13% and 210bps margin expansion on the back of improvement in operating leverage and richer product mix The company is continuously garnering new business from Ford, M&M, Honda, Fiat Chrysler, Volvo Eicher, Royal Enfield (RE) Debt to remain higher owing to recent amalgamation, however D/E ratio to go down to 0.5x by FY20E vs 1.2x in FY17

13,6

39

15,5

69

15,1

78

17,9

02

20,3

01

22,8

88

25,7

76

(7.9)

2.2

9.2

18.0

13.4 12.7 12.6

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

-

5,000

10,000

15,000

20,000

25,000

30,000

FY14

FY15

FY16

FY17

FY18

E

FY19

E

FY20

E

%Rs mn

Revenue (Rs Mn) Growth % YoY - RHS

1,49

2

1,90

8

1,90

1

1,91

6

2,45

6

2,86

1

3,29

9

10.9

12.3

12.5

10.7

12.1 12.5

12.8

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

-

500

1,000

1,500

2,000

2,500

3,000

3,500

FY14

FY15

FY16

FY17

FY18

E

FY19

E

FY20

E

%Rs mn

EBITDA (Rs Mn) EBITDA Margin (%) - RHS

20.8

26.3

15.5 13.9

17.3 18.4 19.5

11.5 12.9

9.2 9.4 10.9

12.3 13.5

-

5.0

10.0

15.0

20.0

25.0

30.0

FY14

FY15

FY16

FY17

FY18

E

FY19

E

FY20

E

% ROE ROCE

JBM AUTO : COMPANY UPDATE

Page | 5

9MFY18 performance -Standalone biz JBMA’s 9MFY18 standalone revenue at Rs. 5.5bn

(+8% YoY) led by strong revenue contribution from M&M, Tata motors and VECV. EBITDA at Rs 646mn (+22% YoY) with improved margin of 11.7% (+135bps YoY) owing to cost control measures and benefit of operating leverage. APAT came at Rs. 246mn (18% YoY).

PV contributes ~70% to the overall revenue, while CV and 2W have a share of 15% and 10% respectively.

We believe standalone business is well poised to benefit from strong domestic PV, and CV demand. In addition, increasing revenue from Tata Motors (owing to revival in PV sales) and Volvo Eicher (gaining market share in CVs) bode well for the company.

However, delay in order for tooling and Bus business constrained the top line and profitability.

9MFY18 Financials Snapshot (Standalone)Particulars 9MFY18 9MFY17 YoY (%) Net Sales 5,527.5 5,109.4 8% Net sales (incl OOI) 5,528 5,109 8% Material Expenses 3,736 3,483 7% Employee Expenses 636 593 7% Other Operating Expenses 510 505 1% EBITDA 646 528 22% Depreciation 187 169 11% EBIT 458 359 28% Other Income 102 118 -14% Interest Cost 201 234 -14% PBT 359 243 48% Add share of profit of JV - - Tax 113 35 226% PAT Befor EO items 246 208 18% Minority Interest - - RPAT after MI 246 208 18% EO Items 111 -100% RPAT Post EO items 246 319 -23% APAT 246 208 18% Adj EPS 6.0 5.1 18% Source: BSE, HDFC sec Inst Research

Sheet metal component division jumped by 21%, offset by lower revenue from tool room division (-25%) and bus division (-62%) Increasing contribution from Tata Motor, M&M and VECV boosted the standalone sales. HCIL (Honda cars) contributes ~25-30% to JBMA’s overall standalone revenue, whereas M&M, Tata Motors and Volvo Eicher contribute ~12-15% each Strong growth in CV segment is also pushing sales higher. JBMA caters to its CV customers like Volvo-Eicher, and M&M via the Indore facility.

JBM AUTO : COMPANY UPDATE

Page | 6

Domestic HCIL Sales And Growth Market Share Of HCIL

Source: SIAM, HDFC sec Inst Research Source: SIAM, HDFC sec Inst Research

Tata Motors PV Sales And Growth VECV Volume And Market Share

Source: SIAM, HDFC sec Inst Research Source: SIAM, HDFC sec Inst Research

Tata’s newly -launched Tiago, Nexon and Tigor gaining strong traction, resulting higher capacity utilization in the Sanand Plant Increase in manpower productivity in Indore plantand optimization of manufacturing cost is helping in margin expansion

352.

2

368.

7

314.

5

198.

8

161.

5

149.

4

173.

0

167.

2

23%

5%

-15%

-37%

-19% -8%

16% 18%

-40%-32%-24%-16%-8%0%8%16%24%32%

0.050.0

100.0150.0200.0250.0300.0350.0400.0

FY11

FY12

FY13

FY14

FY15

FY16

FY17

10M

FY18

Vol. in '000

Sales Vol. ('000) Growth % YoY - RHS

44.8

34.7

36.1

45.5

50.7

42.9

5.6 5.5 5.876.6

7.16.5

012345678

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY13

FY14

FY15

FY16

FY17

10M

FY18

%Vol. in '000

Volume Mkt share(%) - RHS

2.4% 2.1%2.7%

5.4%

7.3%6.9%

5.2% 5.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

FY11

FY12

FY13

FY14

FY15

FY16

FY17

10M

FY18

%

59.5

54.4

73.5

134.

3

189.

0

192.

1

157.

3

144.

8

-4% -8%

35%

83%

41%

2%-18%

17%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

50

100

150

200

250

FY11

FY12

FY13

FY14

FY15

FY16

FY17

10M

FY18

%Vol. in '000

Sales Volume ('000) Growth % YoY

JBM AUTO : COMPANY UPDATE

Page | 7

9MFY18 performance -JBMAS JBMAS’ 9MFY18 revenue at Rs 6.3bn (4% YoY)

supported by jump in export volume of Ford India, however lower than expected domestic volume of Ford (-3%) and Renault (-18%) constraint the top line growth. EBITDA at Rs 807mn (+18% YoY) with improved margin of 12.8% (+146bps YoY) owing to cost control measures and benefit of operating leverage. PBT at Rs. 423mn(32% YoY), benefited from reduction in interest cost.

9MFY18 Financials Snapshot (JBMAS) Particulars 9MFY18 9MFY17 YoY (%) Net Sales 6,326.9 6,056.2 4% Net sales (incl OOI) 6,326.9 6,056.2 4% Material Expenses 4,572.6 4,308.5 6% Employee Expenses 609.1 653.2 -7% Other Operating Expenses 337.4 409.7 -18% EBITDA 807.8 684.8 18% Depreciation 229.2 194.6 18% EBIT 578.6 490.2 18% Other Income 1.3 0.8 63% Interest Cost 156.7 170.8 -8% PBT 423.2 320.2 32% Source: Company, HDFC sec Inst Research

Ford Domestic Volume And Growth Strong Growth In Export Volume Of Ford

Source: SIAM, HDFC sec Inst Research

Source: SIAM, HDFC sec Inst Research

JBM Auto System (JBMAS, 73.89% subsidiary) has four facilities -Maramalai Nagar, Oragadam, Hosur and Sanand to serve major OEMs including Ford, Renault-Nissan, Daimler, Royal Enfield Ford contributes to more than ~40-45% in overall revenue of JBMAS while other two key contributors are Renault and RE Ford has started exporting cars produced at its manufacturing facility at Sanand in Gujarat to Europe.

12.2

25.6

29.3

48.1

81.7

104.

0

158.

5

147.

7

691

11114

64 70 27 52

16.6

-200%0%200%400%600%800%1000%1200%1400%1600%1800%

-20.0 40.0 60.0 80.0

100.0 120.0 140.0 160.0 180.0

FY11

FY12

FY13

FY14

FY15

FY16

FY17

10M

FY18

%

Export vol. ('000) Growth % YoY - RHS

98.5

92.6

77.2

84.5

75.1

79.9

91.4

72.0

167%

-6%-17% 9% -11%

6% 14%

(3.2)

-400%

-300%

-200%

-100%

0%

100%

200%

-

20.0

40.0

60.0

80.0

100.0

120.0

FY11

FY12

FY13

FY14

FY15

FY16

FY17

10M

FY18

%

Domestic vol. ('000) Growth % YoY - RHS

JBM AUTO : COMPANY UPDATE

Page | 8

JVs profit jumped by 35% YoY in 9MFY18

Consolidated Profit from its 3 JVs JOAI (JBM Ogihara Automotive India) Ltd, Indo tooling and JBM MA automotive ltd jumped by 35% YoY to 91mn in 9MFY18 led by strong jump in JBM MA profitability. The company has tied up with Fiat for supplying sheet Metal part for its new vehicle (Jeep compass), which is receiving overwhelming response

Toyota is JOAI’s key client. Toyota sales in India are in an upsurge with its wide range of offerings from sedans to SUV segments. Rising sales in premium segment cars bodes well for JOAI. Toyota’s domestic sales have risen 12% YoY in FY17. Both the new Fortuner and Innova Crysta have contributed to this growth. However, during 9MFY18, JOAI revenue was muted owing to marginal fall in Toyota’s volume and slowdown in tooling business.

Electric Buses- Government pushing the cart

Apart from CNG and diesel Buses, under the JV with Solaris, JBMA launched ECOLIFE - 100% electric Bus, which was unveiled in the Auto Expo, Feb 2018. Solaris has expertise in developing electric Buses, while JBMA would provide its in-house engineering, design expertise, market knowhow, manufacturing facilities, and infrastructure. The vehicle will be powered by lithium batteries. With the Indian

government pushing for electric vehicles, JBMA is in a sweet spot to reap the benefit out of this. The Centre is targeting a fully electric fleet for public transport, including buses, taxis and auto-rickshaws under the second phase of FAME India scheme. The pilot phase or phase I of the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME India) was launched by the government in 2015, which expires on March 31, 2018. Thereafter, the phase II will be launched.

The current incentives for fully electric buses (category M2 & M3 as per CMVR) are:

Incentive Level 1 (In case of localisation of minimum 15% is achieved): 60% of purchase cost or Rs 8.5 mn, whichever is lower

Incentive Level 2 (In case of localisation of minimum 35% is achieved): 60% of purchase cost or Rs 10 mn, whichever is lower

Tata Motors, Ashok Leyland, Mahindra & Mahindra and JBM are some of the companies who are bidding for tenders floated by state governments and municipal corporations. At least 11 states including Maharashtra, Tamil Nadu, Andhra Pradesh, Himachal Pradesh and Karnataka have floated tenders to buy fully electric buses.

JBM MA profitability was boosted through new business from Fiat During 9MFY18, JOAI revenue was muted owing to marginal fall in Toyota’s volume and slowdown in tooling business Electric Bus business to start contributing from FY19 only

JBM AUTO : COMPANY UPDATE

Page | 9

Key risks JBMA forayed into Bus manufacturing in FY14 by

unveiling a low-floor intra-city Bus, which was a drag on its financials. However, there have been orders procured from STUs. Apart from CNG and diesel Buses, under the JV with Solaris, JBMA launched

ECOLIFE - 100% electric Bus, and is looking to invest ~3bn over 4-5 years. Higher capex for the Bus division may again negatively impact the earnings of the company.

Key Assumption Segment Wise Revenue(Rs mn) FY16 FY17 FY18E FY19E FY20E Component Division 14,508 16,549 19,084 20,976 23,310 Growth (%) -1% 14% 15% 10% 11% Tool Room Division 768 1149 977 1111 1265 Growth (%) -22% 50% -15% 14% 14% Bus Division 420 240 800 1200 Growth (%) -43% 233% 50% Total 15,276 18,118 20,301 22,888 25,776 Growth (%) -2% 19% 12% 13% 13% Inter segmental rev 98 216 Total Revenue 15,178 17,902 20301 22888 25776 Growth (%) -2% 18% 13% 13% 13% JBM Auto Standalone 5,669 6,980 20301 22888 25776 Growth (%) -6% 23% 189% 13% 13% Subsidiaries JBM Auto System Ltd 7196.5 8414.3 Growth (%) 0% 17% Joint Ventures JBM Ogihara Automotive India Limited 790 1285 1183 1324 1483 Growth (%) -7% 63% -8% 12% 12% JBM Solaris Electric Vehicle Private Limited 0 0 0 375 750

JBM MA Automotive Private Limited 1579.50 1591.80 Growth (%) 4% 1% Indo Toolings Private Limited 96.70 138.60 148.30 158.68 169.79 Growth (%) -12% 43% 7% 7% 7% Source: Company, HDFC sec Inst Research

Likely volume growth of its key customers likes Ford, Renault, VECV, HCIL, TAFE, RE and HMSI will boost overall revenue. PV, CV and tractor will be key growth drivers of Revenue JBMAS and JBMMA revenue will be consolidate in standalone from FY18 owing to amalgamation Our target multiple (at a 20% premium to JBMA’s historical mean) is premised on strong earnings outlook (31% CAGR over FY17-20E)

JBM AUTO : COMPANY UPDATE

Page | 10

Peer valuation

MCap (Rs bn)

CMP (Rs/sh) Rating TP

Adj EPS (Rs/sh) P/E (x) EV/EBITDA (x) RoE (%) FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

Bharat Forge 355 763 NEU 731 15.9 20.6 33.2 48.0 37.1 22.9 24.0 19.4 13.0 19.7 22.8 30.1 Balkrishna Industries 200 1,037 NEU 1,122 44.9 52.8 62.3 23.1 19.6 16.6 15.0 13.1 11.2 29.7 30.6 31.4 Exide Industries 175 206 BUY 262 8.5 11.0 12.6 24.2 18.7 16.4 14.5 13.6 10.4 21.4 20.3 23.8 Suprajit Engineering 36 277 NEU 296 10.3 14.0 16.6 26.9 19.7 16.7 16.1 12.4 10.7 24.6 26.5 25.0 Jamna Auto 31 79 BUY 90 2.6 3.6 4.5 30.8 22.2 17.5 17.0 12.6 10.0 28.0 31.9 32.8 Ramkrishna Forgings 21 734 BUY 913 19.6 34.9 51.3 37.5 21.0 14.3 12.0 9.1 6.8 10.5 14.7 18.7 Subros 20 330 NEU 375 9.1 13.5 18.7 36.4 24.5 17.6 19.6 16.3 13.9 14.8 19.4 23.0 JBM Auto 18 432 BUY 560 18.3 24.8 31.2 23.5 17.3 13.8 9.3 8.8 7.5 17.3 18.4 19.5 NRB Bearings 15 157 BUY 204 7.4 8.7 10.2 21.2 18.0 15.4 12.2 10.5 9.2 21.0 21.3 21.4 Lumax Autotech 12 884 BUY 987 36.3 43.8 54.9 24.4 20.2 16.1 10.3 8.4 6.5 14.7 15.8 17.4 Source: Company, HDFC sec Inst Research,

JBM AUTO : COMPANY UPDATE

Page | 11

Income Statement (Consolidated) Year ending March (Rs mn) FY16 FY17 FY18E FY19E FY20E Net Revenues 15,178 17,902 20,301 22,888 25,776 Growth (%) 9.2 18.0 13.4 12.7 12.6 Material Expenses 10,219 12,225 13,865 15,609 17,579 Employee Expenses 1,710 1,953 2,091 2,335 2,578 Other Operating Expenses 1,347 1,808 1,888 2,083 2,320 EBITDA 1,901 1,916 2,456 2,861 3,299 EBITDA Margin (%) 12.5 10.7 12.1 12.5 12.8 EBITDA Growth (%) (0.3) 0.8 28.2 16.5 15.3 Depreciation 590 608 713 758 813 EBIT 1,312 1,308 1,744 2,103 2,487 Other Income (Including EO Items) 64 105 120 130 140

Interest 528 529 581 555 529 PBT 848 885 1,282 1,678 2,098 Add share of profit of JV 7 35 40 Tax (Incl Deferred) 219 258 413 531 652 RPAT 629 627 877 1,182 1,485 EO (Loss) / Profit (Net Of Tax) - 111 - - RPAT before MI 629 737 877 1,182 1,485 Minority Interest (106) (79) - - - RPAT after MI 523.8 658.6 876.7 1,182.3 1,485.4 Less dividend to preference shareholder 9.6 9.6 9.6 9.6 9.6

APAT attributable to equity shareholder 514.1 538.5 867.1 1,172.7 1,475.7

Adjusted EPS (Rs) 12.8 13.4 18.3 24.8 31.2 EPS Growth (%) -31% 5% 36% 35% 26% Source: Company, HDFC sec Inst Research, *incorporated amalgamation effect

Balance Sheet (Consolidated) As at March (Rs mn) FY16 FY17 FY18E FY19E FY20E SOURCES OF FUNDS Share Capital - Equity 204 204 237 237 237 Share Capital - Preference 100 100 100 100 100 Reserves 3,233 3,892 5,486 6,554 7,913 Total Shareholders Funds 3,537 4,196 5,822 6,890 8,249 Minority Interest 746 825 - - - Long Term Debt 1,489 1,516 1,366 1,216 1,066 Short Term Debt 3,409 3,408 4,171 4,071 3,971 Total Debt 4,899 4,924 5,538 5,288 5,038 Net Deferred Taxes 522 662 675 689 703 Long Term Provisions & Others 480 234 247 247 247 TOTAL SOURCES OF FUNDS 10,184 10,841 12,282 13,113 14,236 APPLICATION OF FUNDS Net Block 7,285 7,565 9,000 9,142 9,430 CWIP 98 - - - - Goodwill - - - - Investments 395 162 162 162 162 LT Loans & Advances 158 518 158 158 158 Total Non-current Assets 7,936 8,245 9,320 9,462 9,750 Inventories 2,880 2,557 3,226 3,512 3,955 Debtors 2,913 3,550 3,615 4,076 4,590 Other Current Assets 1,381 1,318 1,512 1,635 1,822 Cash & Equivalents 75 29 173 310 727 Total Current Assets 7,249 7,453 8,527 9,533 11,094 Creditors 3,878 3,636 4,144 4,280 4,803 Other Current Liabilities & Provns 1,124 1,222 1,421 1,602 1,804

Total Current Liabilities 5,002 4,857 5,565 5,882 6,607 Net Current Assets 2,248 2,596 2,962 3,651 4,486 TOTAL APPLICATION OF FUNDS 10,184 10,841 12,282 13,113 14,236

Source: Company, HDFC sec Inst Research, *incorporated amalgamation effect

JBM AUTO : COMPANY UPDATE

Page | 12

Cash Flow Statement(Consolidated) Year ending March (Rs mn) FY16 FY17 FY18E FY19E FY20E Reported PBT 848 885 1,282 1,678 2,098 Non-operating & EO items 111 - - - Interest expenses 528 529 581 555 529 Depreciation 590 608 713 758 813 Working Capital Change (439) (654) (298) (552) (419) Tax Paid (181) (118) (399) (518) (638) Other operating Items OPERATING CASH FLOW ( a ) 1,346 1,360 1,879 1,921 2,382 Capex (929) (790) (2,147) (900) (1,100) Free cash flow (FCF) 416 571 (268) 1,021 1,282 Investments - - - - Non-operating Income INVESTING CASH FLOW ( b ) (929) (790) (2,147) (900) (1,100) Debt Issuance/(Repaid) 121 (47) 1,050 (250) (250) Interest Expenses (528) (529) (581) (555) (529) FCFE 10 (6) 201 216 503 Dividend (79) (90) (103) (114) (126) FINANCING CASH FLOW ( c ) (455) (617) 413 (885) (865) NET CASH FLOW (a+b+c) (38) (46) 145 136 417 Opening bal of Cash & Cash Equ 113 75 28 173 310 Closing Cash & Equivalents 75 28 173 310 727

Source: Company, HDFC sec Inst Research

Key Ratios (Consolidated) FY16 FY17 FY18E FY19E FY20E PROFITABILITY (%) GPM 32.7 31.7 31.7 31.8 31.8 EBITDA Margin 12.5 10.7 12.1 12.5 12.8 APAT Margin 4.1 4.1 4.3 5.2 5.8 RoE 15.5 13.9 17.3 18.4 19.5 RoIC (or Core RoCE) 10.0 10.6 10.4 11.7 13.3 RoCE 9.2 9.4 10.9 12.3 13.5 EFFICIENCY Tax Rate (%) 25.8 29.2 32.2 31.7 31.1 Fixed Asset Turnover (x) 1.06 1.21 1.23 1.26 1.39 Inventory (days) 69.3 52.1 58.0 56.0 56.0 Debtors (days) 70.0 72.4 65.0 65.0 65.0 Other Current Assets (days) 33.2 26.9 27.2 26.1 25.8 Payables (days) 93.3 74.1 74.5 68.3 68.0 Other Current Liab & Provns (days) 27.0 24.9 25.6 25.6 25.6

Cash Conversion Cycle (days) 52.2 52.3 50.1 53.3 53.2 Debt/EBITDA (x) 2.6 2.6 2.3 1.8 1.5 Net D/E (x) 1.4 1.2 0.9 0.7 0.5 Interest Coverage (x) 2.5 2.5 3.0 3.8 4.7 PER SHARE DATA (Rs) EPS 12.8 13.4 18.3 24.8 31.2 CEPS 29.9 30.3 39.0 41.0 48.6 Dividend 1.8 2.0 2.0 2.3 2.5 Book Value 86.7 102.8 142.7 145.7 174.4 VALUATION P/E (x) 33.5 32.0 23.5 17.3 13.8 P/BV (x) 5.0 4.2 3.0 3.0 2.5 EV/EBITDA (x) 11.8 11.7 9.3 8.8 7.5 EV/Revenues (x) 1.5 1.3 1.1 1.1 1.0 OCF/EV (%) 6.0 6.1 8.2 7.6 9.7 FCF/EV (%) 1.9 2.5 (1.2) 4.0 5.2 FCFE/Mkt Cap (%) 0.1 (0.0) 1.1 1.1 2.5 Dividend Yield (%) 0.4 0.5 0.5 0.5 0.6

Source: Company, HDFC sec Inst Research

JBM AUTO : COMPANY UPDATE

Page | 13

1yr Price Movement

Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period

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

0

100

200

300

400

500

600

700

Mar

-17

Apr-

17

May

-17

Jun-

17

Jul-1

7

Aug-

17

Sep-

17

Oct

-17

Nov

-17

Dec-

17

Jan-

18

Feb-

18

Mar

-18

JBM

JBM AUTO : COMPANY UPDATE

Page | 14

Disclosure: I, Abhishek Jain, MBA, author and the name 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. HSL has no material adverse disciplinary history as on the date of publication of this report. 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 HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes without prior written approval of HSL. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE-INB/F/E 231109431, BSE-INB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. No.: INH000002475, CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

JBM AUTO : COMPANY UPDATE

Page | 15

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel,Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com