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Inline revenue growth, gross margin lower; reiterate SELL

Result Synopsis

JCHAC has continued to deliver superlative performance with strong industry leading growth for 3 quarters in a row. Revenue grew 41.5% marginally higher than estimates, while EBITDA loss has been 16% higher than anticipated. Lower gross margin has contributed in higher-thanexpected EBITDA loss. Our channel checks suggest JCHAC has now started to regain its market share loss, however it’s market share is way below its peak market share of ~12%. 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 third 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 continue to maintain SELL on the stock with revised PT of Rs2,151 now valuing of 45x FY27EPS 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.

JCHAC has seen significant erosion of its market share, its market share has halved in FY24, however with its strong performance since Q4FY24 and follow up performance in 1HFY25, 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 12%. we continue with SELL on the stock as stock price has seen significant appreciation in recent past.

Result Highlights

* Quarter summary – JCHAC has registered strong performance with revenue coming marginal higher than our estimates, with revenue growing at 41.5% yoy. JCHAC has outperformed industry for 3rd quarter in a row.

* Margins – Gross margin although has improved on yoy and sequential basis, while it is far lower than its historic gross margins. EBITDA loss has reduced by ~40% on strong revenue with operating leverage starting to play out.

* Market share – Company after losing significant market share in FY24, has managed to stem its market share loss, and would it has again started to regain 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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