JNK India IPO Review 2024

adminApril 22, 2024

JNK India IPO Review 2024: JNK India is set to issue an IPO of Rs. 649.47 Cr will open on April 23, 2024. The issue will close on April 25 and be listed on the exchange on April 30, 2024. In this article, we will analyze the strengths and weaknesses of JNK India Limited IPO Review 2024. Read on to find out. !

JNK India IPO Review – Company Overview

JNK India is a manufacturer of process heaters, reformers and cracking furnaces for process industries such as oil and gas refineries, petrochemical and fertilizer industries. The company is a subsidiary of South Korean company JNK Global, one of the world’s largest process heater manufacturers.

Process heaters are industrial heaters that directly heat fluids or gases by burning a fuel source such as natural gas or propane. A reformer is a device that converts hydrocarbons such as natural gas or naphtha into synthetic gas, a mixture of hydrogen and carbon monoxide.

Cracking is also used to convert large hydrocarbon molecules into smaller molecules, which can then be used to make a variety of products such as fuels, chemicals, and polymers. Cracking is the process of breaking down hydrocarbons, which typically involves heating the feedstock in the presence of a catalyst.

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The company specializes in thermal design, engineering, manufacturing, supply, installation and commissioning of heating equipment and serves domestic and international markets. Over the years, JNK India has diversified into flare and incinerator systems and has been developing capabilities in the renewable sector using green hydrogen.

Heating equipment is needed in process industries such as oil and gas refineries, petrochemicals, fertilizers, hydrogen and methanol plants, etc. In India, JNK has completed projects in eight Indian states and globally, in Nigeria and Mexico.

Additionally, domestically, we are carrying out projects in Gujarat, Odisha, Haryana, and Rajasthan in India. Globally, we have projects underway in Oman, Algeria and Lithuania.

Industry introduction

India is the world’s third-largest oil consumer and oil demand is expected to double between 2022 and 2025, reaching 11 million barrels per day by 2045.

Increasing demand for transportation fuels and petrochemical feedstocks is a major growth driver for the Indian refining industry. India is expected to be one of the largest contributors to non-OECD oil consumption globally.

According to the Ministry of Petroleum and Natural Gas (“MoPNG”), the country’s consumption of petroleum products increased by 10% during FY23 compared to FY22, reaching nearly 223 million tonnes. By fiscal 2031, 18 refinery projects with a cumulative capacity of 124.0 MMTPA are expected to be commissioned.

Petrochemicals are a key component of India’s industrial sector and a major driver of economic growth. In 2020, per capita polymer consumption in India was around 12 kg, while the global average was 37 kg. Due to gradual GDP growth, demand for petrochemical products is expected to increase significantly in the medium to long term.

India is an agricultural economy, with approximately 80% of the population dependent on agriculture. As the population grows, there is a need to increase agricultural production and diversify the agricultural base. Fertilizer is one of the major agricultural inputs to increase food grain production. Strengthens the soil and improves fertility.

Urea is the major fertilizer used in India and accounts for approximately 60% of India’s total fertilizer consumption. Domestic production of urea cannot meet domestic demand. India plans to add production capacity in the sector to reduce dependence on imports and aims to become self-reliant by 2025.

JNK India IPO Review – Finance

JNK India reported revenue of Rs. 407 Cr in FY23, up 37.4% from Rs. 296 Cr in FY22. Revenues continued to increase due to increased revenue recognition. JNK India’s revenue has grown at a CAGR of 72% since FY21.

During the same period, net profit grew at a whopping 68% CAGR over FY21. In FY23, JNK India reported a net profit of Rs. 46 Cr in FY23, resulting in an increase of Rs. 36Cr in FY22.

JNK India IPO Review – Key Players

JNK India is the third and smallest player in the process heat manufacturing industry. Thermax is the company’s closest competitor, offering a variety of solutions in the energy, environmental and chemical sectors. JNK is mainly a manufacturer of process combustion heaters, reformers and cracking furnaces.

Thermax’s extensive diversification and ventures in solar and green energy lead to the company being highly valued at 113x price-to-earnings. On the other hand, BHEL, a heavy equipment manufacturer that received multi-year contracts from the government, has a P/E ratio of 186x.

Compared to its peers, JNK has a basic income of Rs. 9.66 and priced above Rs. 415 is issued at a price-to-earnings ratio of 42.96x.

JNK India IPO Review Key Players — **Source: Company RHP**

Company Strengths

Established track record with a diverse customer base: JNK India commenced operations in 2010 and has a track record of successful project completion spanning over 10 years. As of December 2023, we are providing services to 21 domestic customers and 8 overseas customers.
Well-positioned to capture industry tailwinds: Growing demand for transportation fuels and petrochemicals is a key growth driver for the Indian refining industry and the company is well positioned to reap these benefits.
Diverse product portfolio: JNK has a diverse portfolio of heating equipment needed for various industries, including oil and gas, petrochemicals, and fertilizers.
Powerful Spellbook: As of December 31, 2023, JNK India has a strong order book of Rs. 845 Cr, of which 86% of the orders were from India. The current size of the order book gives the company revenue visibility over the next 2.5 years, given the current revenue amount.

company’s weaknesses

Inconsistent revenue streams: Since the company generates revenue based on projects awarded in the form of contracts, the company’s revenue stream is very difficult to predict.
Dependence on promoter: JNK India generated 54% of its FY23 revenue from South Korean promoter JNK Global. The subsidiary generated 74% of its revenue from its promoters in FY22.
Rising raw material prices: Steel, pipes, briners and pans are some of the essential raw materials that make up JNK products. The company also imports some products from China and Europe. Product inflation in these countries can have a significant impact on JNK’s profits.
Product Concentration Risk: JNK India generated 85% of its revenue in FY23 from sales of heating equipment. Exposure was even higher in the first nine months of FY24, with 93% of revenue during this period coming from heating equipment.