JTL INDUSTRIES

Pan-India leader in steel pipes

JTL Industries is a fast-growing, dynamic steel tube manufacturing company which specializes in producing ERW black pipes, pre-galvanized and galvanized steel pipes, large diameter steel tubes and pipes, and hollow structures. All the products are available in hot dip galvanized, pre-galvanized and without coated (MS black) grades. With a rich history of over three decades, the company has evolved into a fast-growing steel tube manufacturing company. It specializes in producing a diverse range of products, including ERW black steel tubes, pre-galvanized and galvanized pipes, large diameter steel tubes and pipes, solar structures and hollow structures.

The group’s total production capacity stands at 5,86,000 tonnes. All its plants have the capacity to produce value added products, including galvanized pipes. Additionally, its Chhattisgarh plant is backward integrated and offers cost synergies by facilitating the procurement of raw materials at a competitive price. The company is doing well and its prospects going ahead are all the more promising. Consider:

• The company has 10 registered brands offering a cumulative of 1,000 plus SKUs. These products find applications across diverse industries such as construction, core infrastructure, heavy vehicles, water distribution and energy. With a network of over 1,000 dealers and distributors, it effectively serves the entire nation and even international markets spanning 20 countries across 5 continents.
• Q3 FY2024 saw robust demand resulting in an impressive 76% increase in sales volume to 1,00,905 tonnes. For the nine-month period, sales volume grew by 62% to a total of 2,59,933 tonnes, which also surpassed the FY23 sales volume of 2,40,000 tonnes. Furthermore, sales of value-added products surged 46% to 81,000 tonnes in the nine months. Sales jumped by 65% to Rs 567.4 crore in Q3 and by 46% to Rs 1,574.3 crore in 9M FY24. In Q3, EBITDA grew 46% to Rs 42.5 crore and 50% to Rs 115.4 crore in 9M FY24, led by an increase in the scale of operations. However, in Q3FY24,
• Moreover, to enhance its manufacturing capabilities, the company has recently implemented Direct Forming Technology (DFT) at its Mangaon facilities, which will be around 1 lakh tonnes. This initiative will not only enhance capacity utilization and manufacturing efficiency but will also open doors to new geographical markets. This will also increase SKUs to 1,500 SKUs.
• Simultaneously, the management is strategically outlining a significant capacity expansion initiative in Maharashtra through its subsidiary, JTL Tubes Limited, which will further elevate the company’s manufacturing capability, allowing it to broaden its product portfolio and offer an array of products under one roof
• order to meet the desired target, it will raise Rs 1,310 crore through various means. Of this fundraise, it will raise Rs 810 crore via fully convertible warrants on a preferential basis through the promoter and non-promoter categories. The remaining Rs 500 crore will be raised through the QIP route. Post completion of expansion, its kitty of valueadded will increase, which will increase EBITDA per tonne as well
• For FY 2024, JTL has achieved a remarkable milestone by attaining its highest-ever sales volume, reaching an unprecedented 341,846 tonnes. This surpasses the sales volume of the previous fiscal year, FY23, which stood at 240,316 tonnes, showcasing a robust growth rate of 42.25%. Additionally, JTL experienced a significant rise in sales of value-added products, with a notable increase of 34.45%, to 99,818 tonnes in FY24. In FY 2024, we expect the company to register EPS of Rs 6.6, which is likely to rise to 10.4 in FY 2025. For FY 2026, the company can be expected to register EPS of Rs 16.4. The scrip trades at Rs 204. P/E on the FY 2026 EPS works out to 12.4.

PERFORMANCE INDICATORS (Rs. in crore)

CHEMTECH INDUSTRIAL VALVES

Riding on industry capex expansion

Chemtech Industrial Valves has been in the business of manufacturing industrial valves since years together. A valve is a device for regulating, directing or controlling fluid flow. It opens, closes or partially obstructs different passageways. Technically, these are fittings. Modern control valves regulate pressure and flow downstream as well as operate on well-known automation systems. Valves are also of great use in the military and transport sectors.

The company’s plant is located at Kudus, 55 km from Mumbai. The nearest railhead is at Kalyan, around 40 km from its plant, the nearest seaport is JNPT, around 75 km away, and the nearest truck terminal is just 20 km away at Bhiwandi. Prospects for the company going ahead are encouraging. Consider:

Chemtech has propelled itself to the forefront of today’s global steel, power, oil & gas, fertilizers, chemicals and cement sectors.

• The company receives orders directly from industrial giants like HPCL, LPSC, IOCL, ONGC, BARC, BHEL, SAIL, NTPC, Tata Steel, Jndal, L&T, Essar, Reliance and Hindalco, and is a regular supplier to these clients, as well as to various private sector companies. It also has a reasonable export base.
• With a primary focus on the iron & steel sector, the company has collaborated with major steel plants in India and has even penetrated the Russian steel market through its export endeavours
• The company has been granted a patent for its innovative product, ‘Line Blind’. This product helps end-users across industries to achieve over 90% cost savings in pipeline blanking costs, all while increasing safety during blanking operations. The company is receiving a tremendous response from customers across the steel sector for this unique product which offers a very high RoI to clients.

CAPEX SPREE

• Riding on high demand and improved margins, all major industry players in India are planning capacity expansions. While the company is active across a number of sectors, a major focus is the steel sector where the company enjoys tremendous goodwill, given the credentials it has created with all major steel plants in India.
• The Indian industrial valves market size is estimated at $ 2.41 billion in 2024, and is expected to reach $ 3.38 billion by 2029, growing at a CAGR of greater than 7% during the forecast period (2024-2029
• The management is very optimistic about its prospects over the next 4-5 years, considering the huge capex being undertaken by all major industrial houses in India. The management is confident that the credentials built up over the last 2 decades will bear exponential fruit over the next 4-5 years as it now has vendor approvals from all major steel plants, including for all types of critical applications, which represent a high potential revenue stream in the coming years
• The steel industry is currently on a growth spree in line with the National Steel Mission. This growth in capacity will see fresh investments to the tune of Rs 3 lakh crore over the next 8-10 years. Industrial valves would represent around 1% of this capex, which the company is strongly focusing to serve. A majority of this capex would be undertaken by the 5 major integrated steel plant groups in India; i.e.’ JSW Steel, Jindal Steel & Power, Steel Authority of India, Arcelor Mittal Nippon Steel India, and Tata Steel. The management is confident that Chemtech is well-positioned to cater to these companies as they are existing customers; hence, revenue visibility remains strong for the coming 3-5 years. For the nine months ended December 2023, sales jumped 78% to Rs 20.98 crore and PAT was up 729% to Rs 3.01 crore. In FY 2024, we expect the company to register EPS of Rs 1.7, which is likely to rise to 2.34 in FY 2025. For FY 2026, the company can be expected to register EPS of Rs 3.0 and EPS of Rs 4.2 in FY 2027. The scrip trades at Rs 113. P/E on FY 2027 EPS works out to 27.5.

PERFORMANCE INDICATORS (Rs. in crore)