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Momentumisers: Can JBM Auto take advantage of the strong PV upcycle?

market | Dec 23, 2022 9:37 AM IST

Momentumisers: Can JBM Auto take advantage of the strong PV upcycle?

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Shares of JBM Auto are up for the third straight month in December and have gained over 15 percent so far this month.

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Shares of JBM Auto gained over 10 percent on Thursday, its best performance in a single session in over three months. The stock has gained close to 20 percent this month and is up for the third straight month. Even then, the stock is down 2 percent on a year-to-date basis.
JBM Auto is a tier-1 supplier of key systems and assemblies to the automotive OEM industry. It caters to reputed clients like Ashok Leyland, Bajaj Auto, Ford, Honda, and Hero Motocorp.
For the quarter that ended in September, the company's revenue crossed the Rs 1,000 crore mark, growing by 37 percent year-on-year. Net profit also increased 43 percent from the year-ago period while operating profit or EBITDA was up 30 percent.
Among the key triggers for the stock include a strong upcycle for passenger vehicles for the next two years. According to a note from JM Financial, continued and buoyant demand for new and recent launches, a healthy order book and normal inventory is likely to drive the growth in the Passenger Vehicle segment going forward.
Encouraging revenue potential in the tooling business is another potential trigger for the stock. The business grew 80 percent sequentially during the September quarter but was flat year-on-year. This is said to be a high margin business.
Increasing economies of scale in the bus division is another reason behind the bullish outlook on the stock. Economies of scale is a proportionate savings in cost which is gained by an increased level in production.
Over the last week, delivery volumes have been high in JBM Auto's stock. Delivery quantity has been 4.5 times higher than its 5-week average, while the traded volumes have been even higher at 10.8 times its 5-week average.
Shares of JBM Auto are now down 4 percent after a 11 percent surge on Thursday.
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Disclaimer: Stocks mentioned in the segment are not recommendations. Investors are advised to carry out due diligence before taking any investment decision.

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