Axis Securities assigns buy coverage on JTL Industries after Q2, says 'investment thesis intact'

Steel tube manufacturer JTL Industries has reported over a 34 per cent increase in its consolidated profit at Rs 27.91 crore in the July-September quarter in comparison with Rs 20.80 crore reported in a year-ago period. JTL, in a regulatory filing, said that its total income increased to Rs 505.12 crore from Rs 366.99 crore in Q2 of FY23.

Post announcement of the result, leading brokerage firm Axis Securities has assigned a buy call on the small-cap stock.

It said that JTL reported good growth in sales volume in Q2FY24 at 81.7kt, up 57 per cent YoY and the management expects to achieve a sales volume of 3.3 lakh tonnes for the full year FY24, representing a growth of 37 per cent YoY.

The brokerage said that the firm's investment thesis is intact and that it is on its path to enhancing capacity to 1MT by FY25. Value-added products share target is 40 per cent for FY24 and 50 per cent in FY25.

"Out of the incremental 0.4MT capacity by FY25, ~50 per cent of the capacity will be equipped with DFT (Direct Forming Technology) which will enhance efficiency and capacity utilization. This will also add additional stock-keeping units to the company’s portfolio. The DFT will come online in Q3FY24, which will boost VAP share in  H2FY24," the report said.

"With higher sales volumes and VAP share on the increased capacity ahead, we maintain our BUY rating on the stock," it said. The target price is Rs 265 per cent share.

JTL Industries is a leading producer of electric resistance welded steel pipes with a production capacity of more than 6 lakh metric tonnes per year. Its shares made an all-time high of Rs 249.50 during the last trading session on Friday. It closed sharply higher at Rs 246.70 even as the benchmark indices showed a decline.