Can JTL Industries’ growth plans generate additional profits after its 310% share price surge?

India’s steel sector has received considerable attention due to its significant impact on various industries and the country’s ambitious goal of becoming a dominant manufacturing powerhouse, as evidenced by initiatives such as Make in India.

The steel pipe sector plays a critical role in developing the country’s infrastructure, supporting a variety of efforts, including connecting rivers and providing clean drinking water to households.

In line with this, India’s stainless steel pipe industry is expected to grow at an average annual rate of 4.5% from 2022 to 2027. India currently ranks as the world’s second-largest producer, accounting for about 2% of the country’s GDP. It is expected that Korea will surpass China in terms of crude steel production and become the second largest steel consumer.

This provides an opportunity for JTL Industries, a small-cap company that produces various steel pipes. Over the past three years, the company has delivered multibagger returns of 310%.

Additionally, the company is committed to expanding its capabilities. Recently, it acquired a controlling stake in Nabha Steels and Metals, giving it ownership of a state-of-the-art steel products manufacturing plant.

This newly acquired facility has a production capacity of 200,000 tons and, as announced by the company, specializes in producing a variety of steel products, including long steel products such as coils and billets. So should you own this company? Well, let’s take a closer look at this article to find out.

JTL Industries Corporate Overview

JTL IndustriesFormerly known as JTL Infra Limited, is a prominent player in structural steel tubes and pipes with a rich history of 30 years in the industry.

JTL specializes in manufacturing ERW black and hollow steel tubes and pipes. In addition to these core products, the company has diversified its offerings to include value-added products such as solar module mounting structures/panels, hot-dip galvanized steel tubes and pipes.

Operating out of four modern manufacturing facilities strategically located across India, JTL has two plants in Punjab. One has a capacity of 100,000 MTPA at Gholu Mazra (Chandigarh) and the other has a capacity of 150,000 MTPA at Mandi Gobindgarh (Punjab).

In Maharashtra, the company operates a plant at Mangaon with a capacity of 200,000 MTPA, providing access to export ports. JTL also recently acquired a 100,000 MTPA plant in Raipur following its merger with promoter-owned Chetan Industries.

JTL Industries’ Segment Overview

Hot dip galvanized steel tube and pipe

JTL operates significant facilities mainly focused on the production and export of galvanized steel tubes/pipes, welded black pipes/tubes and electro-galvanized steel tubes/pipes.

We produce steel pipes for a variety of purposes, including mild steel pipes used in structural and general engineering work, ERW pipes for water and sewage systems, steel pipes used in belt conveyor idlers, wells, and lancing pipes. Automotive and industrial needs.

ERW black and hollow steel tube and pipe

JTL is engaged in manufacturing and global export of a wide range of hollow sections including structural hollow sections, hollow steel sections, square/rectangular hollow sections, round hollow sections as well as mild steel black ERW square tubes, rectangular tubes and round hollow sections. Hollow cross-section tube.

Solar module mounting structure

Rooftop solar installations are becoming increasingly popular in the industrial sector as they offer a practical solution to meet high electricity demand.

In line with this trend, JTL is expanding its presence in solar module structures and emphasizing the supply of high-quality products both domestically and internationally. international market.

The company is committed to promoting widespread use of solar energy through efficient deployment of solar panels on rooftops, buildings, and facades.

Finance of JTL Industries

In FY 2023, JTL Industries saw significant growth in its revenue, surging 14% to reach ₹1,548.4 crore compared to ₹1,355.32 crore in FY 2022. After analyzing four years from FY2020 to FY2023, the company recorded a compound annual growth rate (CAGR) of 88%.

At the same time, there has been a notable increase in net profit, with a 47.5% increase from Rs 61.06 billion in FY 2022 to Rs 90.12 billion in FY 2023. Cumulative net profit recorded a CAGR of 107% over the four years from fiscal 2020 to fiscal 2023.

In FY23, JTL Industries maintained favorable financial metrics with return on equity (ROE) of 29.80% and return on equity (ROCE) of 34.14%.

JTL Industries’ future plans

Capacity expansion plan

JTL plans to enhance its current production capacity from 600,000 tonnes per annum (MTPA) to 1 MTPA by fiscal 2025 with a total investment of Rs. 34 billion.

It also aims to increase its value-added products (VAP) share from 31% in FY23 to 50% by FY25. JTL plans to increase capacity by an additional 0.2 MTPA each at its Mangaon and Raipur facilities by the end of FY25, reaching a total capacity of 1 MTPA.

In the third quarter of 2024, JTL announced plans to set up a large-scale capacity expansion project in Maharashtra through its wholly-owned subsidiary JTL Tubes Limited. The plan focuses on expanding and diversifying the company’s product range.

Through these capital expenditures, JTL will introduce additional production lines, strengthen its manufacturing capabilities for galvanized, pre-galvanized and color coated products, and strengthen its competitiveness through forward and backward integration to become a leading comprehensive structural steel supplier. We are aiming for this. solution.

Management is targeting 30% year-on-year sales growth in FY24 along with improved product mix, ultimately targeting 50% contribution from high-margin value-added products (VAP) by FY25.

As most of its ambitious expansion will be financed through internal accruals and convertible bond issuance, JTL expects to maintain low leverage levels, which are indicative of sound financial health.

attractive financial ratios

JTL demonstrates solid financial performance with an EBITDA margin (operating margin) of 8% and a PAT (profit after tax) margin of 6%, which exceeds peers’ margins of 7% and 4%, respectively.

Additionally, JTL demonstrates prudent financial management by consistently maintaining its debt-to-equity ratio (D/E) below 1x. As of December 2023, the D/E ratio is 0.12 times, which is significantly lower than the peers’ ratio of 0.36 times.

conclusion

JTL Industries has demonstrated impressive growth and financial prudence. With ambitious expansion plans, increased focus on value-added products, and favorable industry trends, the company appears poised for continued success.

However, challenges such as raw material volatility and competition persist. As an investor or industry observer, what is your view on the future of JTL? Please share your thoughts on the prospects for this small company.

A work written by Nalin Surya S.

By leveraging the Stock Screener, Stock Heatmap, Portfolio Backtesting and Stock Comparison tools on the Trade Brains portal, investors have access to comprehensive tools to identify the best stocks, stay informed and updated with stock market news. invest.