Fundamental Analysis of Jupiter Wagons

Basic analysis of Jupiter Wagons: The Government of India has announced a budget of Rs. 2.4 Lakh Cr indian railways In the recent Union Budget. Railways, which are the lifeblood of the country, connect various states, making it very economical to transport goods throughout India and to ports where they will be exported to the world.

You can read about the key developments expected in this industry in our industry overview. Today we will talk about the fundamental analysis of Jupiter Wagons, a company that can directly benefit from the growth of its sector.

Fundamental Analysis of Jupiter Wagons

We’ll take a look at what this company does, how big its business is, and what you can expect from this industry. So, let’s take a closer look and fundamentally analyze the company’s performance before coming to any conclusions.

Company Overview

Jupiter Wagons Ltd, a subsidiary of Kolkata-based Jupiter Group, was established in 2006 and has been a leader in the railway wagon manufacturing industry since then. The company started its business as a manufacturing business. freight wagon For Indian Railways.

It has now built a diversified business centered around Indian railway manufacturing. Some products are produced together with freight wagons. braking system and marine container Domestic and international use.

Jupiter has manufacturing facilities in Jamshedpur, Indore, Jabalpur and Baddi. The company can produce more than 8,000 wagons per year. Along with this, we also have several partnerships to bring the latest technologies to India. Let’s take a look at some of these partnerships in our fundamental analysis of Jupiter Wagons.

1. Darko CZ: The partnership with the 205-year-old Company will enable Jupiter to manufacture train brake systems for Indian Railways.
2. LAF: The partnership will enable the company to manufacture drawbars, draft equipment, heavy-duty trading devices and buffers.
3. Kovis Kivarna: Through this partnership, the company gains expertise in manufacturing brake discs, axles and gearboxes for rolling stock trains.
4. Allegra Workshop: We are a company specializing in track materials and equipment with 108 years of history. Jupiter will manufacture welded cast steel crossings for subways and other trains.
5. CAF: The company plans to build a rail transit system for the company to manufacture subway trains.

In addition to these companies, Jupiter also has partnerships with: Tatrabagonka Poprat, Budamar Logisticsand TSAW Drone. Jupiter’s order book enjoys strong support from customers across a variety of industries such as commercial vehicle, rail and logistics companies. As of FY23, the company has a strong order book of Rs. 58,200 Cr is enough for the company for the next three years.

Looking at the company’s revenue segments, we see that its revenue is concentrated in its rail wagons, which bring in ~77% of revenue and grew ~99% over the year. A brief analysis of the company’s revenue segments and growth is given below:

Industry Overview

As mentioned at the beginning, the government has allocated Rs. 2.40 Lakh Cr towards Railway-Capex. This is the highest quota ever, up 51% from the previous year. The allocation for rolling stock was Rs. KRW 3,758.1 billion, double the amount compared to the same period last year.

Indian Railways recorded its best-ever performance by achieving first freight load of 1512 MT in FY23 compared to 1418 MT achieved in FY22. Coal supply to power plants has increased, with 569 MT of coal moved compared to 485 MT in FY22.

Indian Railways placed its largest-ever order of about 72,000 wagons last year. Reports hint that an additional 40,000 wagons will be ordered. It is poised to increase rail’s share of freight transport from around 27% – 45% by 2030.

The Dedicated Freight Corridor (DFC), which began operations in 2020, has achieved the milestone of operating one million trains. Until the beginning of this year, 55,332 trains operated on the Eastern Dedicated Freight Corridor (EDFC) and 44,658 trains operated on the Western Dedicated Freight Corridor (WDFC).

The New Dadri-New Rewari section of the Western Dedicated Freight Corridor is a key milestone connecting four major western states, currently under construction. DFC is an important initiative under the National Logistics Policy, which aims to reduce logistics costs from approximately 15% of the country’s GDP to 8% by 2030.

Increasing the capacity of DFC’s freight infrastructure is critical to achieve the Indian Railways’ target of 3000 MT freight load by 2027. This will definitely lead to increased traffic and thus demand for wagons.

Jupiter Wagons – Finance

Sales and Net Profit

Jupiter Wagons recorded revenue worth Rs. 2073 Cr in FY23, an increase of 75.45% from Rs. 1,182 Cr in FY22. Out of the last five years, the company recorded negative revenue growth only in FY20. However, it has expanded its revenues very aggressively starting in FY21 and is currently maintaining a compounded growth rate of 75.9% over FY19.

Net profit increased 1.43 times from 1 billion won. 49.65 Cr in FY22 to Rs. 121Cr in FY23. The company’s profits have been extremely cyclical, with a loss of Rs 13 Lakh in FY20. The company has since recovered significantly.

It is important to note that Jupiter Wagons remained an independent company until FY19-21, so its financials and metrics are reported in standalone numbers. FY22&23 are reported in consolidated format.

profit

The company’s operating margins remained extremely volatile, ranging from a low of 1.66% in FY20 to a high of 12.19% in FY23. The company has not yet achieved margin stability, but reported record-high margins in FY23.

The company’s net profit margin hit a four-year high of 5.83% in FY23. Margins in FY19 were inflated due to a huge profit of Rs. 108Cr. Barring this, we can assume that Jupiter Wagon maintains margins in the 4%-5% range.

rate of return

Jupiter’s return on equity was 16.24% in FY23, up 869 Bps from 7.55% in FY22. Compared to profit growth of 143%, the company’s reserves grew only 41%. This has led to rapid growth in returns.

Return on capital employed increased significantly from 11.79% in FY22 to 23.99% in FY23. Both returns show signs of greater utilization of the company’s earnings to fund further growth.

debt analysis

Jupiter’s debt-to-equity ratio was 0.36x, up from 0.2x in FY22. This is due to a rapid increase in current borrowings, which increased approximately 1.4 times compared to last year. At the same time, we reduced our long-term debt by 32%.

The company’s interest coverage ratio remains comfortably high at 7.94x, with anything above 1.5x considered a safe measure. Out of five years, the company was at financial risk in FY20, when lower EBIT made it more difficult to service its debt.

key indicators

key indicators Jupiter Wagon They are listed below.

Jupiter Wagons – Future Plans

1. Jupiter Wagons plans to expand production of brake discs and brake systems for the railway segment such as passenger coaches and Vande Bharat coaches. The company aims to generate Rs. You can earn 500 Cr in profit from brake business in 3-4 years.
2. The company also has plans to enter the electric vehicle segment through its partnership with American Green Power. We plan to begin production of vehicles capable of driving a distance of 80 to 250 km on a single charge in the fourth quarter of 2024.
3. The partnership with CAF also allows Jupiter to manufacture Metro Train wagons.

conclusion

Jupiter Wagons is a stock that has consistently grown its profits. We have a strong order book sufficient to cover the next 3-5 years of operations. Even though yields are still strong and debt is low, this is the perfect mix for a bullish stock.

The company is currently achieving a lot and its international partnerships should also complement its business segments. However, thanks to this growth, the stock price has risen approximately 250% since January 2023, reaching a peak of PER of 61.5 times.

Additionally, it is important to consider that the company’s inventory and accounts receivable are 100 billion won. 491 Cr & Rs. 213Cr each. These assets account for 43% of the company’s total assets. Now, having these assets tied up and not being realized as cash reduces the company’s working capital efficiency.

Would you now bet on Jupiter Wagons at this valuation? Let us know in the comments below.

Written by Nasir Hussein

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