Thanks for this article. With re: valuation, JBM Auto, Olectra Greentech are at an earnings multiple of 60-70x. In your analysis, you've used a 100x forward multiple for this outfit -- a premium of 50% over current PE. To me, that seems a tad aggressive. Also, I had come across a couple of reports last year where the assumed forward multiple was 40x for such a business (while as you rightly pointed out, traditional players have a lower multiple of 20-25x)
Have you come across something that points to investors ready to pay so much more (i.e. 100x) for companies in this sector?
The 100x was a bull-case ceiling, not a base/average case, let me say that upfront. peers at 60-70x is the correct reference, I feel the 40x you've mentioned is honestly the more defensible base case for this business today. Nearly half of JBM's earnings still come from traditional auto components, and cannot be valued at EV multiples, so a mix of both number would naturally comes down.
The 100x only holds if GCC contract revenue eventually gets re-rated, which is a specific thesis, not a given.
A sum the parts components at 20-25x, E-mobility at 60-80x — would land closer to ₹800-950 and would be far harder to argue against.
100x would be possible without those caveats attached was aggressive.
My personal belief - The best businesses will always be expensive to get into, but it's the possibility of their future that decides whether they were worth it. These are the sectors that surely we cannot miss to get in.
Thanks for this article. With re: valuation, JBM Auto, Olectra Greentech are at an earnings multiple of 60-70x. In your analysis, you've used a 100x forward multiple for this outfit -- a premium of 50% over current PE. To me, that seems a tad aggressive. Also, I had come across a couple of reports last year where the assumed forward multiple was 40x for such a business (while as you rightly pointed out, traditional players have a lower multiple of 20-25x)
Have you come across something that points to investors ready to pay so much more (i.e. 100x) for companies in this sector?
Glad to see your comment.
Fair point, and well spotted. few points:
The 100x was a bull-case ceiling, not a base/average case, let me say that upfront. peers at 60-70x is the correct reference, I feel the 40x you've mentioned is honestly the more defensible base case for this business today. Nearly half of JBM's earnings still come from traditional auto components, and cannot be valued at EV multiples, so a mix of both number would naturally comes down.
The 100x only holds if GCC contract revenue eventually gets re-rated, which is a specific thesis, not a given.
A sum the parts components at 20-25x, E-mobility at 60-80x — would land closer to ₹800-950 and would be far harder to argue against.
100x would be possible without those caveats attached was aggressive.
My personal belief - The best businesses will always be expensive to get into, but it's the possibility of their future that decides whether they were worth it. These are the sectors that surely we cannot miss to get in.
Thanks again for pointing this out.