JTL Industries has been on the radar of investors for quite a sometime as the iron and steel pipe manufacturer has delivered multibagger returns to investors in the last three years. However, select brokerage firms see more upside in the counter and suggest buying it.
Domestic brokerage firm Axis Securities has initiated coverage on JTL Industries with a 'buy' rating, suggesting another upside of 35 per cent in the stock from its previous close, citing its wide distribution reach through strategically located plants, aggressive capacity expansion and value growth plans and stable operating profits and returns during the expansion phase. JTL has four manufacturing facilities dispersed geographically across India, which allows the company to source raw materials at competitive prices as well as enable it to expand its sales and footprint in domestic and international markets. This coupled with a 150 ktpa hot mill makes the plant backward integrated which provides cost synergies to the company, said Axis Securities. Shares of JTL Industries surged more than 5 per cent to Rs 364.95 on Wednesday and the company was commanding a total market capitalization of around Rs 3,100 crore. The stock had settled at Rs 347.35 on Tuesday.
Watch: Share market indices at fresh lifetime high; Sensex crosses 63,700, Nifty surpasses 18,900 and Bank Nifty touches new peak; will the rally continue? Shares of JTL Industries have rallied about 98 per cent from its 52-week low at Rs 185.70 in September 2022. The stock has gained about 20 per cent in the year 2022 so far. However, it has delivered a return of 2,180 per cent in the last 3 years from its Covid-19 lows around Rs 16. The Indian structural tubes market has the potential to grow from 13MT in CY23 to 22MT by CY30, led by the government’s thrust on developing infrastructure, which will result in a shift towards robust demand for structural steel. JTL is planning to expand its capacity from the current 0.586MT to 1MT by FY25 and it will be enhancing its VAP share from the current 31 per cent in FY23 to 50 per cent by FY25. JTL will add an additional 0.2MT capacity each at Mangaon and Raipur by the end of FY25 and 14kt at Mandi which will take its total capacity to 1MT by FY25, Axis said. "JTL’s revenue, EBITDA and PAT grew by 14 per cent, 45 per cent and 48 per cent, respectively YoY in FY23 on the back of capacity expansion. While its ROE and ROCE moderated to 29.6 per cent and 22.1 per cent, respectively in FY23, they were still at a healthy level given its expansion phase. The EBITDA per tonne improved by 30% per cent to Rs 5,383 in FY23," it added. JTL Industries has been operating in the structural steel tubes and pipes business for the last 30 years, led by an experienced management team with over 30 years of experience in the steel and pipes industry. It continues to expand its capacity and has increased it to 0.586MT in FY23 from 0.4MT in FY22. It has been successful in expanding its footprints globally with over 1,000 client-centric SKUs. The company currently exports its products to 5 continents in over 20 countries and has a strong domestic distribution network of more than 800 distributors.
"With the volume expansion capex going on, the company’s ROE and ROCE are expected to moderate but would remain decent nearly 20 per cent over FY24-26E. We initiate coverage on JTL with a BUY rating and value it at 22 times its FY25 EPS to arrive at our 1-year forward target price of Rs 470, implying an upside potential of 36 per cent," Axis added in its maiden report. The company board of JTL Industries is scheduled to meet on July 29, Saturday to consider the results for the quarter ended on June 30, 2023. The board will also consider the proposal of issuance of fully paid bonus equity shares to the shareholders of the company.
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