Yogesh Portfolio

Portfolio Composition: A Dual-Strategy Approach

Growth Stocks

This category features fundamentally robust stocks, primarily from the midcap and small cap segments, which exhibit the potential to become future high performers. The selection criteria hinge on several growth indicators, including capital expenditure, positive sector trends, increasing market share, and expanding addressable markets. These stocks are distinguished by their rapid growth rate compared to their industry peers.

Breakout Stocks

The second facet of the portfolio focuses on stocks poised for short-term growth in key financial metrics such as revenue, operating profit margin (OPM), EBITDA, and net profit. These stocks are identified at a breakout point, offering a low-risk entry with a stringent risk management strategy in place, capping the maximum loss per trade to no more than 1% of the total capital.

This strategic blend aims to balance high-growth prospects with calculated short-term gains, optimizing the portfolio for both resilience and performance.

JTL Industries

Growth Ahead

  • Company’s announcement in Dec’23 to raise Rs 1,310 Cr to enhance the capacity to 2 MTPA by the end of FY27
  • Capacity will reach 2MT by the end of FY27 and full utilization (max ~65% industry standard) on the 2MT capacity will be achieved in FY28
  • JTL will enhance its SKUs from 1,000 to 4,000 by FY28 with a focus on VAP (Value-added products). This will translate to ~60% VAP share by FY28 as against 31% as of 9MFY24.
  • The newer VAP products will have EBITDA/t of Rs 9,000- 11,000/t, against the general products at Rs 2,000-2,500/t, which will drive the blended EBITDA/t to ~Rs 7,500/t by FY28 (Rs 5,383/t in FY23).
  • The 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 adding more DFT lines, introducing color-coated products, and pre-galvanised sheets

Company Outlook & Guidance

  • Sector Outlook: Positive
  • Post strong Q3FY24 sales volumes, FY24 sales volume to reach ~3.5 Lc tonnes, up 45% YoY, ahead of earlier growth guidance of 30% YoY.
  • In Q4FY23, the VAP share could bounce back to 40% (~35% for FY24) from 20% in Q3FY24, as the maintenance of the galvanizing pot is over. 0.56 MT to 1 MT expansion is on track and will be complete before FY25.
  • DFT facilities of 2 Lc tonnes out of the total incremental capacity of 4 Lc tonnes will start from Q1FY25.

Concall Highlights Q3FY24

  • 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).
  • 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
  • JTL 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.
  • 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 Risk

  • Delay in project execution for the 2 MTPA expansion at the Mangaon Maharashtra plant
  • 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

Phase Wise Growth at JTL Ahead

Disclaimer: Not buy or sell recommendations, only for educational purpose
Invested ~ 8% of total capital @ 190

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Cochin Shipyard

Anticipated Breakout and Financial Growth Trajectory

Breakout is expected in near future as stock is currently in a consolidation phase, with its price oscillating between ₹800 and ₹900 with volumes drying up. It exhibits a robust growth trajectory, reflected in the ascending trends of its revenue, operating profit margin (OPM), and net profit. The order book stands impressively at seven times the trailing twelve months (TTM) revenue, signaling strong future earnings potential. Over the next three years, the company is projected to achieve a compound annual growth rate (CAGR) of 22.7% in revenue and an even more impressive 36.2% in net profit, underscoring its promising financial outlook.

Disclaimer: Not buy or sell recommendations, only for educational purpose
Invested ~ 8.5% of total capital @ 890

Building a position in JTL Industries too, with a target of 8-10% of portfolio size. Currently accumulated at 194.70 and makes up 3.57% of my portfolio value. Planning to hold it for the next few years.

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Check out Zen Technologies as well. It’s in defence tech. 2x sales growth guided for the next FY and 50% CAGR growth for the next 2-3 years. Price in a slightly rising accumulation channel for the last 6+ months. It’s 10% of my portfolio at 953 average price.

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JTL Industries FY24 Business Update:

The company is clearly winning the battle in the steel tube and pipes category.

JTL Industries grew sales volumes by 42.5% YOY in FY24.

This is a far better show than the likes of APL Apollo that grew sales volumes by 15% YOY and Hi-Tech Pipes that grew sales volumes by 10% YOY.

The CAPEX plans at JTL Industries are well on track as the company is set to improve on its product mix and capture market share.

The only concern with JTL Industries is that the value-added segment grew at a slower pace (up 34% YOY) than overall volume growth (up 42.5% YOY).

The company never had any issues on the fundamental side and has kept performing much better than its peers.

JTL Management had guided to grow volumes by 35-40% CAGR for the next few years so this volume growth number of 42.5% is at par with what the management had guided in the past.

How do we establish if these numbers being reported by management and their commentary is for real? And if they are for real how much of the narrative is sustainable or already in the price?

Their revenue and earning performance before 2020 are nothing to write home about, being flat for 6-8 years. Sudden 10x increase in revenue and PAT, in just 3 years, should lead to even more due diligence. If their business just caught the sectoral tailwind then is this remarkable turnaround in their financial performance sustainable? Can they withstand next downturn cycle which is typical of commodity stocks?

They make the same products as other dozens of listed players. Operating margins are much lower than peer group and they only went up due to higher top line growth. Valuations already look very stretched, compared to industry and peer group average, and that too at the top of bull run. Main promoters have sold quite a lot of shares in the last quarter (good timing before 34% correction).

I have been following steel tube/pipe industry for quite some time and every time sector goes through a bull run, it seems permanent what with exciting order flows and feel good factor all around… But I have realized that only thing permanent with this sector is cyclicality and reversion to mean of stock prices. It’s very important to time entry and exit to make profit and avoid getting stuck in a downcycle for a very long time.