Synopsis: The shares of this company have fallen by 27 percent in the last 6 months due to weak revenue growth, monsoon effect on capex, and industry headwinds that added to the fall. Can it deliver next year?
JTL Industries’ shares have fallen heavily in the last six months amid weak earnings, monsoon disruptions, and industry headwinds. However, with capacity expansion, operational synergies, and the gradual ramp-up of its DFT segment, investors are now questioning whether these growth drivers can help the stock recover and reach Rs 100 over time.
Since its inception in 1991, JTL Industries Limited has grown from a manufacturer of Electric Resistance Welded Black Pipes to a producer of value-added products such as galvanised steel pipes, solar module mounting structures, and large diameter steel tubes & pipes.
The company even completed an amalgamation in 2022 with Chetan Industries, providing the company with several advantages, including backward integration, proximity to the source of raw materials, and cost synergies.
With four state-of-the-art facilities, JTL Industries Limited has a total manufacturing capacity of 9,36,000 MTPA, serving the entire country and over 20 countries across five continents. The company has a diverse clientele, including B2B, B2G, OEMs, and international markets. By not concentrating on any one sector, the company minimizes its exposure and risks.
With a market capitalization of Rs 2,273crore, JTL Industries Ltd’s shares on Wednesday made a day low of Rs 60.09 per share, up by 0.5 percent from its previous day’s closing price of Rs 59.76 per share. The shares have given a return of 389 percent since their IPO in 2022.
Factors that led to the fall
Weak financial performance: the company’s finances on a consolidated basis were healthy; the EBITDA for the quarter was Rs 37 crore in Q2 FY26, a growth of 21.5 percent QoQ, and PAT grew by 37 percent QoQ to Rs 22 crore, achieved even when the company’s revenue declined by 20 percent QoQ to Rs 431 crore.
This positive EBITDA and PAT reflect the synergies that JTL Industries Limited has started to achieve due to the takeover of JTL Engineering Limited. Even the company’s exports declined by 18 percent YoY to Rs 63 crore.
The real weak performance lies with H1 FY26 financials, where revenue of JTL saw a decline of 11 percent YoY to Rs 883 crore, and the sales volume declined YoY to 160,629 metric tons as opposed to 176,091 in H1 FY26, recording a decline of 9 percent YoY. Where standalone EBITDA saw a decline of 13 percent YoY to Rs 33 crore, and PAT declined by 23 percent YoY to Rs 20 crore.
Uncertain Ratios: The company is currently trading at a high PE of 28.3x compared to an Industry PE of 21.6x and a PEG ratio of 1.67x, indicating overvaluation and investors paying more than the company’s growth justifies. The company has an ROE of 9.8 percent and an ROCE of 12.9 percent, which goes on to show that debt is adding leverage, but overall efficiency is under strain.
Monsoon Slowdown: The Q2 volume drop was caused by floods in Punjab, which hampered the company’s Q2 dispatch by 23,000 tons, and capacity utilization went down to 43 percent, which could have been up to 55 percent.
Expansion in Maharashtra plants is delayed by some rain, so the first is a narrow bit GI plant commencement pushed back to Q4 mid, then is the wider for colour coated that will be around the end of H1 FY27, and the final is API grade that will follow after them.
Industry headwinds: the low raw material prices for HR coil manufacturers, the market has quite bottomed out at the time of the third quarter, with the HR prices going as low as 47 per kg to the edges of 46.5 from the local suppliers, squeezing margins. There are even cheaper offers from overseas for the same, but the industry is safeguarded as they are not viable in the Indian market.
The difference between the HR coil and Patra remains a gap of about Rs 6 to 7 per kg, which has been for the last few years. This stable difference means predictable cost, helping JTL plan margins better, and will also add to the VAP segment.
DFT segment: Direct Forming Technology(DFT) is a process used to manufacture pipes directly from steel coils without first making them round and then reshaping.
The company’s DFT VAP has started and will play an important role in volumes.
The company didn’t include DFT in its VAP in Q1 as it was EBITDA negative. Progressing to Q2, the margins haven’t improved that much, but the EBITDA is positive. This added to weak financials, as there are still approvals that companies need for the DFT segment to command better margins, and they are still in the way of getting themselves into the projects that use DFT, as they are still a new entrant. They even made sales with lower margins compared to markets that cost them in H1.
Brokerage view: Nuvama has earlier maintained a ‘buy’ target of Rs 110 but reiterated it to Rs 106, which means investors could expect an 78 percent return. The brokerage stated that the Q2 performance was mixed, as sales volume declined due to the disruption in cargo deliveries caused by heavy rain, but EBITDA per tonne was up 47 percent QoQ and 97 percent YoY. Which was a result of inventory gains, better margins on DFP products and better export earnings
Considering the weak Q2 performance, a relatively slow H1 versus a stronger H2 trend, the impact of the monsoon, and the fact that the DFT segment was in its early phase, have contributed to the fall.
But, going forward in H2 FY26, seeing a narrow bit GI plant commencement, to DFT with improved market presence, the company, with its plan to meet its guidance, and RC industries acquisition, which will be a fully owned subsidiary of the company, adding to the company’s Q3 numbers.
Factoring all this in, the company has a lot of potential to improve its numbers and market position. If the company can follow up on all these points, we will be able to see it getting priced in the market in the coming quarters.
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