Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JTL Industries Ltd (BOM:534600, Financial) achieved the highest ever sales volume of around 3.4 lakh metric tons, showcasing a robust growth of over 42% compared to the previous year.
- The company experienced a significant increase in the sales of value-added products, with a 35% rise from 71,000 tons in FY23 to around 1 lakh tons in FY24.
- Revenue grew by 31% to INR2,040 crore in FY24 compared to INR1,550 crore in FY23, attributed to robust demand and strategic expansion initiatives.
- JTL Industries Ltd (BOM:534600) maintained a healthy EBITDA margin of 10.5%, supported by an increase in value-added product share and enhanced efficiencies across all plants.
- The company anticipates a 35% growth in revenue for FY25 compared to FY24, with a focus on maintaining an EBITDA metric ton of 5,000 plus for the whole year.
Negative Points
- There is a concern about potential overcapacity in the market, with many competitors increasing their capacities, which could impact demand and pricing.
- The company faced a slowdown in demand in Q4 FY24, attributed to a lack of government demand and the election scenario.
- JTL Industries Ltd (BOM:534600) has seen a decline in quarter-to-quarter sales by approximately 17%, from INR567 crore to INR466 crore.
- The company's return on capital employed (ROCE) and return on equity (ROE) have reduced significantly, attributed to ongoing expansions and work-in-progress assets.
- There is a delay in the commissioning of the Direct Forming Technology (DFT), which was supposed to be operational in Q1 FY25 but is now expected to be commissioned by the end of H1 FY25.
Q & A Highlights
Q: What is your primary versus secondary mix? And within secondary, are the manufacturing materials from petra re-rolling or sponge-iron based?
A: Our capacity is split 50%-50% between primary and secondary markets. For secondary products, we procure billets and convert them into narrow coils at our Raipur plant. For primary, we source materials from JSW and Tata at our Raipur and Maharashtra plants.
Q: Has the secondary segment been a big driver of growth due to lower prices? And is there a market shift towards primary steel?
A: There has always been a primary and secondary market divide. The secondary market has seen increased demand for lighter gauge structures. Going forward, we are expanding our product profile to include more primary products, but secondary products will continue to have strong demand.
Q: Who are your core competitors in the secondary segment, and is there a risk of overcapacity in the market?
A: In the secondary market, there are numerous smaller players. We expect the market to absorb incremental capacities due to growing demand and our focus on value-added products, which opens up new markets for us.
Q: Can you shed some light on the high fixed asset turnover compared to industry peers?
A: Our high asset turnover is due to recent upgrades and acquisitions at book value. As we deploy more CapEx, our asset turnover will normalize to industry levels.
Q: What gives you confidence to outgrow competitors and expand market share from 9% to 25%?
A: Our 40% growth over the last financial year was driven by adding more SKUs and market share. Being a debt-free company allows us to be flexible with pricing and margins, supporting our growth and expansion.
Q: Do you witness any industry slowdown due to political scenarios?
A: We don't see a significant slowdown. While there was a slight dip due to government demand, we expect demand to pick up post-elections. We maintain a healthy mix of supplies to mitigate industry-specific slowdowns.
Q: Why has the value-added mix in terms of percentage not improved despite absolute growth?
A: Increasing value-added product production requires first increasing VAP head production. We are adding galvanized pipes and other VAP lines, which will reflect in higher VAP percentages in the future.
Q: What is the total CapEx planned for the next two to three years, and what is the update on warrants?
A: We plan to spend around INR150 crore-plus this year and INR500 crore-plus to INR600 crore-plus over the next two to three years. Promoters have already contributed INR170 crore, with more expected by September.
Q: What are the capacity expansion plans for FY25 and FY26, and the sales volume guidance?
A: We aim to reach 1 million tonnes capacity by the end of FY25, with a 30% growth target. For FY26, we expect another 30% growth, with further expansions planned to reach 2 million tonnes by FY27.
Q: How do you hedge against raw material price fluctuations?
A: We maintain inventory for 12 to 15 days and have monthly pricing agreements with primary suppliers like JSW and Tata. For secondary markets, pricing is adjusted daily. We also have price variation clauses with government contracts and fixed pricing for exports.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
