I have a question regarding this. How can JTL get 67% stake for just 70 Cr when the FY24 Revenue is 225 Cr? The discount is ridiculous according to me. Unless the company was in debt and they needed rescuing.
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Hi thats not possible…beacuse of increasing tubing demand at times the manufacturing gets outsourced to spare capacities outside
It is very much possible to get spare tubing capacity outside
As per me following things can happen going forward this includes some prospects as well as observation on recent scuttlebut:
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Assets in north india (Near chandigarh were always under valued to avoid taxes)
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Raipur manufacturing got merged last year only, that asset was worth 200-300 cr producing revenue on conversion basis for parent before merger.
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All locations, they have huge land parcels, buildings are getting added now. Land value actual and Book always had big difference for them because they were procured in 2000’s and 90’s mostly and they follow cost model for subsequent measurement as per IndAS 16 “Property, Plant and Equipment.”
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Likely to add fresh 500cr assets over next 2 years like one announcement earlier on 2nd March and 9th April but with lower asset turn in future because now the assets based will increase as new capex is done on today’s price bit still they will have decent asset turnover relative to industry peers
So the company used to do other work of pipe making from its sister concerns prior to the merger of all into the listed entity and now they plan to go completely backward like hariom pipes, sambhav sponge (unlisted player in raipur)
So the overall prospects looks good to me going forward.
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Went through the results, aren’t impressive. Weak QoQ, EBITDA margins under pressure, YoY is good due to last to last quarters overperformance.
Let’s wait for management’s guidance.
Now, from here i expect two things can happen to this stock in the very near term.
- Stock tanks to a more reasonable bv/cmp and market decides to cut the premium book value and pe. By how much? We shall soon find out.
Retailers who bought this cheaply might start booking their profits due to exuberance in numbers, and since the overall market is falling due to election uncertainty.
- Stock goes sideways till the next cycle (or atleast a sign) of uptrend in core metrics start.
If anyone can do a side by side comparison with peers wrt the Q4 numbers that would be great help.
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Does this affect their long term prospects ??
There is a permanent change in debt-equity position. Equity has been diluted, debt reduced and balance cash kept in books. When ROE> cost of debt, why hurry to pay off debt? Is it becoz of some time compulsion to convert preferential allotment into equity?
This will naturally impact ROE and multiples.
Need to watch market’s reaction to results. The Q4 production data was a clear warning of what to expect ( i had pointed that out in my April 8 post), but market prefers to continue giving premium multiples.
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Let’s not forget a structural improvement over the years across other metrics - be it ROCE, ROE, Inventory days, Receivable days, etc etc. Its premium is based on a history of good return on incremental capital deployment albeit agree it is still on the higher side. It should take more than one or two bad quarters to derail this valuation.
That said, why does the company have such a horrible history of CFO to EBITDA? The 9 year cumulative PAT is 320 cr while 9 year cumulative CFO is negative 27.3…
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Based on Q4 numbers, there is not much value offered here in this stock.
Unless it was just a one off.
And company resumes to growth of 30-40% post Q1, FY25.
Valuations based on FY24, look stretched.
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From the recent concall, it was stated that company took a conscious decision to focus on increasing VAP share of overall volume so essentially, Volume reduced by 17% but then PAT remained almost same QoQ.
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In the recent concall, someone asked this question and the management answered thus:
(I’m copy pasting the mgmt answer in verbatim)
"Thanks, Pradeep, for your question. Our asset turn was extremely high because the mergers and acquisitions that the company has made in the recent past have been on book value. If you look at the gross block this year, it has increased from around INR90 crores to around INR150 crores.
So this is getting our asset turned down to 14 and 15 from levels of 18 and 19 before.
So this is a gradual shift which will happen over time. And then – as assets will sweat as well, you see the number coming properly as well. This year, as well, we are expecting to deploy close to INR150 crores - INR200 crores on CapEx. So, hence, our gross block will come down – our asset turn will come down further to 12, 13 numbers, which will be across – similar across the industry. It’s just that previously, whatever asset purchase we did for the Mandi plant and the merger we did was around book value. So hence, the asset turn seems bigger right now.‘’
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Yes, it is true the assets of the company were showed at book value and not at fair value but going forward the asset will be of close to 500 crores as per scuttlebut the company has a good land bank for expansion from past many years and now buildings and construction is going on, in the past the they used to manufacture the pipes through their sister concerns and now they are being full Integrated players with merging all those entities into the listed company like we saw recently and also modernization work is going with DFT technology which will help them ensure better quality pipes.
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Nabha steel plant picking up slowly as stated in the concall, YoY 10% growth in sales growth, exports too marginally up.
Disc: invested
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I think it will take time to get to good price levels. Right now the PE is around 24-25 and the profit growth over years is greater than the stock’s price growth. This is good.
Also, the FII contribution picked up in good numbers.
Disc: Invested since March
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Axis securities limited has released an initiating coverage report in which it has recommended a BUY with a price target of 430 apiece.
The stock shows quite a good technical approach
- The price level of 215 and 221 are its Gann level and is consolidating in that price range for couple of days. historically, it has proven that it gives a good momentum to the stock if it breaks the Gann level.
- The Stock is also moving above 10-day moving average, which indicates some bullishness in the stock.
Fundamentally speaking, in June 2024 Quarter, the stock has performed pretty well, with increase in their Revenues, PAT, and EPS, on QoQ basis.
The company has able to reduce its debtor days drastically by 50% from 74 days to 32 days, in the last 10 years and have also maintained a net cashflow in FY24.
The only concern with the stock is that the Promoters have decreased their holdings in the company by 15% in the last 7 years.
However, FII’s have increased their holdings by 5.82% in the same time frame of 7 years.
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Yes, the price has been range-bound for quite some time. Holding since this March at 220 levels. Hopefully, breaks the range with strong volumes.
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is it a good stock for sip ?
I’d say limited timeframe. Smallcap cyclical stocks aren’t generally SIp contenders. plan your entry and exit.
Disc: No holdings.
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Company Current update only 10% (approx) volume growth is there. If we campare to APL apollo which is 10x bigger than JTL have grown volume @ 10%. So choose your SIP stock wisely. Above all this company have the issue of Commodity in it ie RM steel.
thanks bro.i have read the all thread about JTL so i am confuse