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Result Synopsis

JCHAC has delivered superlative performance with significant beat on the revenue front. Revenue grew 75.6% yoy albeit on low base, however growth was ahead of our estimates by 25% respectively. Gross margin has seen marginal expansion of 44bps yoy, however on sequential basis it has contracted by 506bps. EBITDA margin at 5.7% has also contracted by 487bps on sequential basis. EBITDA at Rs566mn has been lower than estimates as EBITDA margin has been low despite the strong revenue growth that company has reported. Our channel checks suggest JCHAC has managed to stem its market loss and is getting aggressive with change in top management. Our channel checks suggest JCHAC’s sales force is back on the field and have been aggressively pushing for volumes to its dealers and distributors. We feel change in strategy will take time to give the desired result and company will have to continuously monitor it to be successful. This has been the second quarter of turnaround performance after many quarters of disappointments, we feel tangible benefits of the new strategy from 2HFY25. We believe the getting aggressive will arguer well for the company as it will be playing to its strength where it can provide quality and give more value to its consumers at the premium end. We downgrade the stock to SELL with PT of Rs1,774 valuing of 35x FY26EPS as there has been significant appreciation in stock price in past 3 months and stock price will be more of the function of the news flow regarding Bosch group taking over JCHAC. The open offer price of Rs1,642 to acquire 25.75% is lower than our target price.

JCHAC has seen significant erosion of its market share, its market share has halved in FY24, however with its strong performance in Q4 and follow up performance in Q1FY25, make us believe it would have regained some of its lost market share. However, there is a very long way to go before company regains its top 5 status in the RAC market which it had 4 years back with market share of 7.5%. we downgrade the stock to SELL as stock price has seen significant appreciation in recent past.

Result Highlights

* Quarter summary – JCHAC has registered strong performance with revenue coming higher than ours and consensus estimates by growing at 76% yoy. JCHAC has managed to beat our revenue estimates by 26%.

* Margins – Gross margin has marginally improved on yoy basis, while on sequential basis it has contracted by 506bps. EBITDA margin at 5.7% has been lower given the strong revenue growth. Gross margins ahs dragged EBITDA margin.

* Market share – Company after losing significant market share in FY24, has managed to stem its market share loss, and would have slightly increased its market share from lower levels.

* Market Buzz – As per our channel checks, JCHAC has again become aggressive, and its sales force has been pushing volumes across the dealers and distributors and taking feedback about the product which was absent for past couple of years resulting in market share loss.

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SEBI Registration number is INZ000185632.