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JBM Auto Limited (NSE:JBMA), a ₹13.38b small-cap, is an auto company operating in an industry whose long product cycles and deep capital outlays make planning ahead difficult. New growth opportunities in smart cars and software is not the traditional focus for most auto companies. Automobile analysts are forecasting for the entire industry, a strong double-digit growth of 22.5% in the upcoming year , and a whopping growth of 91.3% over the next couple of years. This rate is larger than the growth rate of the Indian Below, I will examine the sector growth prospects, and also determine whether JBM Auto is a laggard or leader relative to its automobile sector peers.
View our latest analysis for JBM Auto
What’s the catalyst for JBM Auto’s sector growth?
In the next decade, software integration will likely have a significant impact on the auto industry. In the previous year, the industry saw growth in the twenties, beating the Indian market growth of 21.8%. JBM Auto lags the pack with its lower growth rate of 18.0% over the past year, which indicates the company has been growing at a slower pace than its automobile peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with JBM Auto poised to deliver a 15.9% growth compared to the industry average growth rate of 22.5%. As an industry laggard, JBM Auto may be a cheaper stock relative to its peers.
Is JBM Auto and the sector relatively cheap?
The automobile industry is trading at a PE ratio of 20.89x, relatively similar to the rest of the Indian stock market PE of 19.33x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.9% compared to the market’s 9.3%, potentially illustrative of a turnaround. On the stock-level, JBM Auto is trading at a PE ratio of 18.03x, which is relatively in-line with the average automobile stock. In terms of returns, JBM Auto generated 17.2% in the past year, which is 3.3% over the automobile sector.
Next Steps:
If JBM Auto has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is an automobile industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the automobile sector. However, before you make a decision on the stock, I suggest you look at JBM Auto’s fundamentals in order to build a holistic investment thesis.