BUY

Results Update JTL Industries Ltd Target Price

15th Jan, 2024 Building Materials 300

Largely Inline Q3; Next Leg of Capex to Drive Growth

CMP as of 12th Jan, 2024
Est. Vs. Actual for Q3FY24: Revenue – BEAT; EBITDA/t – INLINE; PAT – MISS
Change in Estimates post Q3FY24 CMP (Rs) 248

FY24E/FY25E: Revenue: -1%/-4%; EBITDA: -4%/-8%; PAT: -7%/-19% Upside /Downside (%) 20%

Recommendation Rationale High/Low (Rs) 267/142

 Compelling growth ahead: JTL’s capacity expansion gets impetus post the company’s Market cap (Cr) 4,239
announcement in Dec’23 to raise Rs 1,310 Cr to enhance the capacity to 2 MTPA by the Avg. daily vol. (6m) Shrs. 8,40,590
end of FY27. A fundraising plan involving Rs 540 Cr from the promoter, Rs 270 Cr from non- No. of shares (Cr) 17
promoter, and Rs 500 Cr through QIP will spur growth ahead. Capacity will reach 2MT by
Shareholding (%)
the end of FY27 and full utilisation (max ~65% industry standard) on the 2MT capacity will
be achieved in FY28. Jun-23 Sep-23 Dec-23

 Growing EBITDA/t trajectory: JTL will enhance its SKUs from 1,000 to 4,000 by FY28 with Promoter 56.20 55.78 56.00
a focus on VAP (Value-added products). This will translate to ~60% VAP share by FY28 as FIIs 0.72 2.35 1.62
against 31% as of 9MFY24. The newer VAP products will have EBITDA/t of Rs 9,000- MFs / UTI 0.69 0.72 0.83
11,000/t, against the general products at Rs 2,000-2,500/t, which will drive the blended Banks / FIs 0.00 0.00 0.00
EBITDA/t to ~Rs 7,500/t by FY28 (Rs 5,383/t in FY23). Others 42.39 41.15 41.55
 Product adjacencies and backward integration to enhance product profile: The
Financial & Valuations
expansion plan from 0.56 MTPA to 1 MTPA is on track and will be completed by FY25. For
the next 1 MT incremental expansion, JTL will focus on enhancing its product profile by Y/E Mar (Rs Cr) FY24E FY25E FY26E
Net Sales 2,088 3,182 4,406
adding more DFT lines, introducing color-coated products, and pre-galvanised sheets. All
EBITDA 154 250 410
these measures will diversify the product portfolio and will earn higher EBITDA/t.
Net Profit 110 167 276
 Sector Outlook: Positive
EPS (Rs) 6 8 12
Company Outlook & Guidance: Post strong Q3FY24 sales volumes, FY24 sales volume to
PER (x) 38 27 19
reach ~3.5 Lc tonnes, up 45% YoY, ahead of earlier growth guidance of 30% YoY. In Q4FY23,
P/BV (x) 5 3 2
the VAP share could bounce back to 40% (~35% for FY24) from 20% in Q3FY24, as the
EV/EBITDA (x) 25 16 11
maintenance of the galvanising pot is over. 0.56 MT to 1 MT expansion is on track and will be
ROE (%) 12% 9% 10%
complete before FY25. DFT facilities of 2 Lc tonnes out of the total incremental capacity of 4 Lc
tonnes will start from Q1FY25. Change in Estimates (%)
Current Valuation: 25x P/E on FY26E EPS (From 23x on FY25E EPS) Y/E Mar FY24E FY25E FY26E
Current TP: Rs 300/share (From Rs 265/share earlier) Net Sales -1% -4% 8%
Recommendation: With higher sales volumes and VAP share on the increased capacity ahead, EBITDA -4% -8% 21%

we maintain our BUY rating on the stock. Net Profit -7% -19% 6%

ESG disclosure Score**

Financial Performance: JTL Industries' (JTL) numbers stood largely in line with our estimates.
Revenue grew by 65%/13% YoY/QoQ to Rs 567 Cr, a 5% beat vs. our estimate, led by higher Environmental Disclosure NA
ASP. EBITDA grew by 46%/14% YoY/QoQ, which was largely in line with our estimates. Social Disclosure Score NA
EBITDA/t fell by 17%/8% YoY/QoQ, in line with our estimates at Rs 4,213/t. This was expected Governance Disclosure Score NA
due to the fall in the VAP share to 19.6% in the quarter from 34% in Q2FY24 and 26% in
Q3FY23. The company’s PAT grew by 47%/8% YoY/QoQ, reporting a 6% miss against our Total ESG Disclosure Score NA
estimates. The miss was led by lower other income and higher finance costs. Sector Average 50.6
Source: Bloomberg, Scale: 0.1-100
Outlook: With the phase-wise volume expansion in progress, we model Revenue/EBITDA/PAT **Note: This score measures the amount of ESG data a company reports
CAGR of 42%/47%/45% over FY23/26E. publicly and does not measure the company's performance on any data point.
All scores are based on 2022 disclosures, The Sector average is for NSE500
companies
Valuation & Recommendation: We maintain our BUY rating on the stock and value JTL at
25x (from 23x, given the growth tailwind) of our FY26 EPS (roll-over from FY25) to arrive at our Relative performance
Mar’25 target price of Rs 300/share, implying an upside potential of 20% from the CMP.
Key Financials (Consolidated)
(Rs Cr) Q3FY24 QoQ YoY Axis Est. Variance
Net Sales 567 13% 65% 543 5%
EBITDA 43 14% 46% 43 -1%
EBITDA/t (Rs/t) 4,213 -8% -17% 4,261 -1%
Net Profit 30 8% 47% 32 -6%
EPS (Rs) 1.77 8% 15% 1.88 -6%
Source: Company, Axis Research Source: Ace Equity, Axis Securities

Aditya Welekar
Sr. Research Analyst
Email: aditya.welekar@axissecurities.in

1
Key Concall Highlights
 JTL Industries has announced a fundraising plan of:
o Rs 810 Cr by issuing and allotting upto 2 Cr fully convertible warrants to the promoter and promoter group category (Rs 540 Cr) and
upto 1 Cr warrants to the non-promoter, public category on a preferential basis (Rs 270 Cr) at an issue price of Rs 270 (Premium to
the announcement date closing share price of Rs 241).
o Rs 500 Cr by way of QIP subject to approval of shareholders.
 The company plans to invest Rs 1,200 Cr in its subsidiary company JTL Tubes Limited to set up a Mega Project in the state of Maharashtra at
Mangaon. The Capex will be partly incurred from the company’s internal accruals and partly from the proposed issue proceeds (preferential/
QIP).
 Sales Volume growth continues: JTL’s Q3FY24 sales stood at record ~1 Lc tonnes (up 76%/24% YoY/QoQ), and the management expects to
achieve sales volume of 3.5 Lc tonnes for the full year FY24 (46% growth YoY). VAP share fell to ~20% in the quarter from 34% in Q2FY24 and
26% in Q3FY23 due to maintenance at the galvanising pot. Its VAP share is expected to come back to 40% in Q4FY24 as the maintenance of
the galvanising pot is over. The company did not face destocking because it is present in both primary and secondary markets. The difference
between primary and secondary steel has increased, which impacted primary market sales (VAP products). With the recent uptick in the HRC
prices, the primary market demand is also expected to pick up in Q4FY24.
 Exports volume: In Q3FY24 exports volume stood at 3.6kt, down 19% YoY and 17% QoQ, as the company focused on the domestic market led
by strong domestic demand.
 Market share position: JTL has its own pricing for its VAP products and doesn’t discount for competition. Commercial-grade black pipe
products have a key dealer network and pricing is similar to competition. It currently has 800 dealers pan India out of a total dealer network of
1,000-1,100 dealers, thereby having 80% of dealers catered by it. As more VAP and SKUs share rise in future, more dealers will get on board
with the company. It currently holds a ~9% market share in the industry and after the onset of the entire 2 MT capacity, its market share will
double to 20% by FY28. The market share has moved from 3% in 2019 to 9% in 2023.
 Structural steel demand outlook: The ERW pipes industry is expected to grow at a faster pace than the steel industry at 12-13% in FY24 vs.
10% growth expected in the steel industry. Post FY24, the ERW pipes industry is expected to grow by 8-9% for the next couple of years as it
replaces traditional long products that were previously used in construction.

Key Risks to Our Estimates and TP

 Delay in project execution for the 2 MTPA expansion at the Mangaon Maharashtra plant is the key risk to our TP and rating.
 Volatility in the steel prices will drive destocking at the dealer's end, impacting EBITDA/t.
 Lower-than-estimated demand scenario to hamper the off-take of volumes, impacting our sales volume growth forecasts

2
Phase Wise Growth at JTL Ahead

 We revise our 12MF target P/E to 25x from 23x given the growth visibility post the promoter-led Capex announcement by JTL. The growth will
come in phases and will accrue fully as the capacity reaches 2 MTPA by FY28.
 APL Apollo Tubes, which is the sector leader, is currently trading at 36x consensus 12MF P/E, a premium to its long-term average of 21x given
the pace of infrastructure growth in the country.

Exhibit 1: Phase-wise Earnings Growth as the capacity ramps up

Assumptions FY23 FY24E FY25E FY26E FY27E FY28E

Capacity (tonnes) 5,86,000 7,50,000 10,00,000 11,00,000 20,00,000 20,00,000

Utilization (%) 41% 47% 51% 62% 50% 65%

Sales Volume (tonnes) 2,40,316 3,50,000 5,10,000 6,80,000 10,00,000 13,00,000

VAP Share % 31% 35% 40% 55% 55% 60%

Revenue (Rs Cr) 1,550 2,088 3,182 4,406 6,875 9,100

Realization (Rs/T) 64,495 59,648 62,400 64,800 68,750 70,000

EBITDA (Rs Cr) 129 154 250 410 635 910

EBITDA per Tonne (Rs/T) 5,383 4,405 4,900 6,030 6,350 7,000

PAT (Rs Cr) 90 110 167 276 391 589

EPS (Diluted) (Rs/sh) 9.28 6.02 7.96 11.95 16.92 25.54

Source: Company, Axis Securities

Exhibit 2: APL Apollo trading at 36x 12MF P/E Exhibit 3: Structural Steel Pipe CAGRof 8.5% over FY 25-30

50

40

30

20

10

Source: Bloomberg, Company

Change in Estimates

Exhibit 4: Earnings Changes

New Old % Change

FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E

Sales 2,088 3,182 4,406 2,101 3,315 4,094 -1% -4% 8%

EBITDA 154 250 410 161 271 339 -4% -8% 21%

PAT 110 167 276 118 205 260 -7% -19% 6%

Sales volume (T) 3,50,000 5,10,000 6,80,000 3,30,000 5,10,000 6,25,000 6% 0% 9%

Source: Company

3
Q3FY24 Results Review
Rs Cr (YE Mar) Q3FY23 Q2FY24 Q3FY24 Q3FY24 YoY QoQ Vs Axis
Consolidated Act Act Axis Est. Act % % %
CG Products (Tonnes) 42,701 53,484 81,116 81,116 90% 52% 0%
VAP Products (Tonnes) 14,616 28,202 19,789 19,789 35% -30% 0%
Total sales volume (Tonnes) 57,317 81,686 1,00,905 1,00,905 76% 24% 0%
VAP share % 25.5% 34.5% 19.6% 19.6% -589 -1491 0
Export as % of total sales volume (%) 7.90% 5.38% 3.61% 3.61% -429 -176 0

Revenue From Operations 343.33 502.10 542.87 567.39 65% 13% 5%

ASP (Rs/t) 59,900 61,467 53,800 56,230 -6% -9% 5%

Cost of materials consumed 312.78 460.36 472.72 474.75 52% 3% 0%

Purchases of stock-in-trade - - - 36.14 nm nm nm
Changes in inventories of finished goods, stock-in-trade. -13.82 -7.73 - -4.66 nm nm nm
Employee benefits expense 3.93 5.43 6.22 4.74 21% -13% -24%
Other expenses 11.38 6.62 20.93 13.89 22% 110% -34%
EBITDA 29.05 37.42 43.00 42.51 46% 14% -1%
EBITDA per tonne (Rs/T) 5,068 4,580 4,261 4,213 -17% -8% -1%

Depreciation and amortization expense 1.09 1.35 2.14 1.50 38% 11% -30%
EBIT 27.96 36.06 40.86 41.01 47% 14% 0%
Finance costs 1.33 1.28 1.18 1.62 22% 27% 37%
Other Income 1.10 3.03 3.03 0.94 -14% -69% -69%
Profit Before Exceptional Items And Tax 27.73 37.81 42.70 40.33 45% 7% -6%
Exceptional Items - - - - nm nm nm
Profit Before Tax 27.73 37.81 42.70 40.33 45% 7% -6%
Total Tax Expenses 7.23 9.89 10.68 10.15 40% 3% -5%
Profit For The Year/Period 20.50 27.91 32.03 30.18 47% 8% -6%

EPS Basic 1.55 1.64 1.88 1.77 15% 8% -6%

EPS Diluted 1.55 1.53 1.76 1.65 7% 8% -6%

GM% 12.92% 9.85% 12.92% 10.78% -214 92 -214

EBITDA % 8.46% 7.45% 7.92% 7.49% -97 4 -43
EBIT % 8.14% 7.18% 7.53% 7.23% -91 5 -30
Tax rate % 26.07% 26.17% 25.00% 25.17% -90 -100 17
NPM% 5.97% 5.56% 5.90% 5.32% -65 -24 -58
Source: Company

4
Financials (Consolidated)

Profit & Loss (Rs Cr)

Y/E March FY22A FY23A FY24E FY25E FY26E
Revenue From Operations 1,355 1,550 2,088 3,182 4,406
Other Income 4 5 6 7 8
Total Income 1,359 1,555 2,093 3,189 4,414

Cost of materials consumed 1,237 1,365 1,809 2,777 3,845

Purchases of stock-in-trade - - 36 - -
Changes in inventories of finished goods, stock-in-trade. (34) (6) 12 - -
Employee benefits expense 18 20 23 35 49
Other expenses 45 41 53 120 103
Total Expenditure 1,266 1,421 1,933 2,933 3,996

EBITDA 89 129 154 250 410

EBITDA per tonne (Rs/T) 4,125 5,383 4,405 4,900 6,030
Depreciation and amortization expense 3 4 7 29 45
EBIT 86 125 147 221 365
Finance costs 8 6 5 5 5
Profit Before Exceptional Items And Tax 82 124 147 223 368
Exceptional Items - (1) - - -
Profit Before Tax 82 123 147 223 368
Total Tax Expenses 21 32 37 56 92
Profit For The Year / Period Attributable To Owners Of The Parent 61 90 110 167 276
Non-Controlling Interests - - - - -

Wt. Avg No of shares outstanding (Cr) Basic (FV Rs 2/sh) 7.23 8.43 17.02 18.22 20.97
Wt. Avg No of shares outstanding (Cr) Diluted 8.00 9.71 18.22 20.97 23.07

Earnings Per Share (Not Annualised)

Basic (Rs.) 8.45 10.69 6.45 9.16 13.15
Diluted (Rs.) 7.63 9.28 6.02 7.96 11.95

DPS (Rs/sh) - 0.20 0.20 0.20 0.20

Payout Ratio 0.0% 2.2% 3.3% 2.5% 1.7%
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Y/E March FY22A FY23A FY24E FY25E FY26E
Net Block 49 65 208 779 1,334
CWIP 3 4 4 4 4
Intangible assets
Investments 12 16 16 16 16
Inventories 119 168 198 304 421
Trade Receivables 110 141 172 218 241
Cash / Bank balance 2 53 347 541 702
Misc. Assets 44 115 115 115 115
Total assets 339 563 1,061 1,978 2,835

Equity capital 13 17 36 42 46
Reserves 184 390 861 1,762 2,596
Borrowings 91 53 53 53 53
Def Tax Liabilities 2 4 4 4 4
Other Liabilities 20 68 68 68 68
Provisions 3 3 3 3 3
Trade Payables 26 29 36 47 65
Capital employed 339 563 1,061 1,978 2,835
Source: Company, Axis Securities

5
 Cash Flow (Rs Cr)
Y/E March FY22A FY23A FY24E FY25E FY26E
Profit before tax 82 123 147 223 368
Depreciation 3 4 7 29 45
Interest Expenses 8 6 5 5 5
Non-operating / EO item (1) (0) - - -
Change in W/C (49) (102) (55) (141) (123)
Tax paid (26) (26) (37) (56) (92)
Operating Cash Flow 17 5 68 60 203
Capital Expenditure (22) (19) (150) (600) (600)
Free cash Flow (5) (14) (82) (540) (397)
Other Investments (13) (2) - - -
Investing Cash Flow (34) (21) (150) (600) (600)
Proceeds / (Repayment) of Borrowings 14 (41) - - -
Equity Share Capital raised - 1 2 6 4
Securities premium received - 22 - - -
Money received against share warrant 12 90 381 737 563
Finance cost paid (8) (6) (5) (5) (5)
Dividend paid (2) - (2) (4) (4)
Other financing activities 0 0 - - -
Financing Cash Flow 17 66 377 734 557
Change in Cash (0.2) 49.8 294.3 193.8 160.7
Opening Cash 0.5 0.3 50.1 344.4 538.2
Closing Cash 0.3 50.1 344.4 538.2 698.9
Source: Company, Axis Securities

Ratio Analysis (x) / (%)

Y/E March FY22A FY23A FY24E FY25E FY26E
Operational Ratios
Sales growth (% YoY) 211.0% 14.4% 34.7% 52.4% 38.5%
EBITDA growth (% YoY) 172.7% 44.7% 19.2% 62.1% 64.1%
Op. profit growth (% YoY) 177.6% 45.0% 17.3% 50.5% 65.2%
Net Profit growth (% YoY) 204.4% 47.6% 21.8% 52.1% 65.2%
EBITDA Margin % 6.6% 8.3% 7.4% 7.9% 9.3%
Net profit Margin % 4.5% 5.8% 5.3% 5.2% 6.3%
Tax Rate % 25.8% 26.5% 25.4% 25.0% 25.0%
Efficiency Ratios
Total Asset Turnover (x) 4.94 3.43 2.57 2.09 1.83
Sales/Gross block (x) 23.98 19.99 9.17 3.85 3.09
Sales/Net block(x) 27.90 23.71 10.04 4.09 3.30
Working capital/Sales (x) 0.15 0.18 0.16 0.15 0.14
Valuation Ratios
PER (x) 28.01 29.71 38.44 27.07 18.87
P/BV (x) 9.58 7.58 5.03 2.88 2.17
EV/Ebitda (x) 20.13 20.70 25.46 16.13 11.10
EV/Sales (x) 1.33 1.73 1.88 1.27 1.03
Dividend Yield (%) - 0.00 0.00 0.00 0.00
Return Ratios
ROE 0.41 0.30 0.12 0.09 0.10
ROCE 0.31 0.28 0.16 0.12 0.14
Leverage Ratios
Debt / equity (x) 0.46 0.13 0.06 0.03 0.02
Net debt/ Equity (x) 0.45 (0.00) (0.33) (0.27) (0.25)
Net debt/Ebitda (x) 1.00 (0.00) (1.91) (1.96) (1.58)
Source: Company, Axis Securities

6
 JTL Industries Ltd Price Chart and Recommendation History

Date Reco TP Research

26-Jun-23 BUY 235 Initiating Coverage
31-Jul-23 BUY 235 Result Update
01-Aug-23 BUY 235 Top Picks
01-Sep-23 BUY 235 Top Picks
03-Oct-23 BUY 265 Top Picks
13-Oct-23 BUY 265 Result Update
01-Nov-23 BUY 265 Top Picks
01-Dec-23 BUY 265 Top Picks
01-Jan-24 BUY 265 Top Picks
15-Jan-24 BUY 300 Result Update

Source: Axis Securities

7
About the Analyst

Analyst: Aditya Welekar

Email: aditya.welekar@axissecurities.in

Sector: Automobiles

Analyst Bio: Aditya Welekar is a PGDBM in Finance with 12 years of experience in Equity Market/Research.

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8
 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock, but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward-looking estimates, valuation or recommendation for the stock

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NEERAJ NEERAJ CHADAWAR

CHADAWAR Date: 2024.01.15

09:36:29 +05'30'