Buy JTL Industries Ltd For Target Rs.115 by Axis Securities
Largely Inline Q3; Progress on Growth Projects a Key Monitorable
Est. vs. Actual for Q3FY25: Revenue – MISS; EBITDA/t – BEAT; PAT – MISS
Change in Estimates post Q3FY25
FY25E/FY26E: Revenue: -21%/-9%; EBITDA: -24%/-9%; PAT: -25%/-9%
Recommendation Rationale
* Largely inline Q3FY25 performance: JTL’s EBITDA/t at Rs 4,005/t (down 5% YoY, but up 21% QoQ) stood slightly ahead of our estimate by 3%. EBITDA (down 17% YoY but up 18% QoQ on impacted base) stood ahead of our estimate by 3%, mainly due to lower RM costs.
* Sales volume lags behind the guidance: In 9MFY25, sales volume grew by only 1.5% YoY (excl. Nabha steel) to 2.63 Lc tonnes. Including Nabha Steel, it has grown by 14.3% YoY to 2.97 Lc tonnes, which still requires a steep jump in Q4FY25 at 1.5 Lc tonnes to achieve the full year FY25 sales volume of 4.5 Lc tonnes. The underperformance was driven by weak Q3FY25 sales volume, which de-grew by 6% QoQ to 97.5 kt, led by weak demand and also due to the delay in the DFT installations. DFT would start now in Q4FY25 (vs. previously guided by Q3FY25), and the sales volume run rate would be higher at 1-1.25 Lc tonnes in Q4FY25.
* EBITDA/t trajectory likely to improve in FY26: Capacity at Raipur has now increased to 2 Lc tonnes from 1 Lc tonnes, with 50% equipped with DFT technology. The DFT lines at the Mangaon facility will start from Q4FY25 (delayed by a quarter). This will take VAP share towards the target of 40%-45% in FY26. After the 2 MTPA capacity expansion by the end of FY27, the VAP share will rise to 55-60% as SKUs and size offerings increase. VAP products with EBITDA/t of Rs 7,000/t + will lead to an increase in EBITDA/t in future
* Sector Outlook: Cautiously Positive
Company Outlook & Guidance: The company’s capacity will grow to 1MT by the end of FY25. Further expansion from 1MT to 2MT will be done through the Mangaon plant (1 MT expansion) in phases with the addition of 25 Lc tonnes of capacity in each half year from H1FY26 onwards by FY27. We cut our EBITDA estimates as we factor in lower sales volume than our earlier assumptions and steep HRC price correction
Current Valuation: 22x P/E on Mar’27E EPS (Roll forward from 23x on Sep’26 EPS)
Current TP: Rs 115/share (Rs 130/share)
Recommendation: We maintain our BUY rating on the stock
Financial Performance: JTL Industries posted a largely inline set of numbers. Revenue stood at Rs 451 Cr (down 20%/6% YoY/QoQ), slightly below our estimate by 4% due to a higher than expected drop in ASP. EBITDA, however, stood 3% ahead of our estimate at Rs 35 Cr (down 17% YoY/, up 18% QoQ) led by lower RM costs. EBITDA/t declined by 5% YoY but improved by 21% QoQ to Rs 4,005/t as Q2FY25 was impacted by traders destocking. PAT stood at Rs 25 Cr (down 17%/5% YoY/QoQ) and missed our estimate due to lower other income.
Outlook: With the phase-wise volume expansion in progress, we model Revenue/EBITDA/PAT CAGR of 25%/33%/27% over FY24-27E. After Q3FY25 results, we cut our FY25/26/27 EBITDA estimates as we factor in lower steel prices. We also trim our FY25/26/27 sales volume assumptions. However, we roll forward our valuation to Mar’27 EPS from Sep’26, which results in our TP of Rs 115/share, implying a 20% upside on CMP. We retain our BUY rating
Valuation & Recommendation: We maintain our BUY rating on the stock and value JTL at 22x (from 23x due to subdued steel prices and prevailing weak demand) of our Mar’27 EPS (from Sep’26) to arrive at our Mar’26 target price of Rs 115/share, implying an upside potential of 20% from the CMP.
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