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Friday, November 12, 2010

Jamna Auto Industries Ltd:-Another 11 bagger(Future growth prospects and outlook,buy/sell/hold,analysis and recomendation)

Jamna Auto Industries Ltd was recommended at 15rs an year odd ago.From their it went on to hit a high of 166 today providing a staggering 1105% return.Check the link if you missed the previous story:-

Scripscan:Jamna Auto Industries Ltd

Story:Jamna Auto is the world''s seventh-largest manufacturer of leaf springs with a total installed capacity of 118,000 tonnes and 62% market share in India. Its plants are located in Chennai, Malanpur (MP) and Yamuna Nagar (Haryana). Primarily used in the suspension systems of commercial vehicles, leaf spring is a low technology and volume-driven business. The industry requires large upfront capital investment, creating an entry barrier for new entrants.Having restructured its operations, the company has now embarked on an ambitious growth plan. Recently, it acquired the manufacturing assets of Tata Motors'' leaf spring division. The assets will be used for the company''s upcoming 60,000-tonne plant at Jamshedpur. The proposed plant will service Tata Motors'' Jamshedpur unit and also export to European markets.Jamna Auto plans to set up a unit in Pantnagar to service two of its largest customers, Tata Motors and Ashok Leyland, which have set up units there. Proximity to these two companies will reduce Jamna Auto''s freight cost and improve its operating margin. The company also plans to more than double the capacity of parabolic springs to 50,000 tonnes by FY10.Jamna has slightly lower opm compared to its peers like Rico Auto and Omax Autos. But this is likely to improve in future, as its capacity utilisation increases and its production of parabolic springs expands.Going forward,I expect the company to grow faster as its capex gets commissioned and it begins to export its products. An improvement in margins may result in even faster growth in net profit. The gains will be visible fully in FY10.INDIA IS emerging as a global outsourcing hub for automotive components and systems. Domestic auto component makers have capitalised on this by scaling up their operations to global size. This has made Indian component vendors like Bharat Forge and Amtek Auto world leaders in their segment.Many companies are now following in their footsteps, including Jamna Auto Industries, the country''s largest manufacturer of leaf springs. The company as mentioned is undertaking aggressive capital expenditure (capex) to emerge as the world''s second-largest spring manufacturer by '10. This provides an attractive growth opportunity for investors willing to stay invested for two-three years.Investors may buy the counter for multibagger gains.

Latest update:Hope you guys made tons of money in Jamna auto too.At present prices its fairly valued.One can re-enter below 125 levels..

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