Jupiter Wagons is ramping up its manufacturing capacity as it preps for large orders from the government.- Its order book of ₹5,818 crore gives robust revenue visibility for the next 18 months, says a Sharekhan report.
- It’s expected to start producing commercial EVs later this year.
The company, which makes rail wagons, passenger coach components, alloy steel casting for rolling stocks and tracks, also produces load bodies for commercial vehicles, marine containers and refrigerated containers. One of its key clients, Indian Railways, is on a capacity expansion spree and Jupiter Wagons is set to benefit.
“Jupiter Wagons is increasing its manufacturing capacity from 600 wagons per month in Q4FY23 to 700 wagons per month by Q4FY24 to meet the growing demand from Indian Railways. The company has a robust order book of ₹5,818 crore, which gives Jupiter Wagons revenue visibility for the next 18 months,” said a research report by Sharekhan.
Railway contracts also provide a good visibility ahead for profits, and are less affected by vagaries of commodity prices. “Railway wagon contracts are pass-through to customers. Steel and labour cost is pass-through based on wholesale price inflation (WPI),” says a report by Arihant Capital.
A few contracts allow the impact of changes in commodity prices or others to be passed on to the clients.
It’s also expanding its scope of railway orders. The company has commenced disc brake production, and received an initial order of ₹80 crore to supply brakes for passenger coaches. The company expects substantial disc brake orders from Indian Railways, and aspires to generate revenues of ₹100 crore in FY24 and ₹250 crore in FY25 from braking systems.
Riding the EV boom
The company — which also has other clients like commercial vehicles OEMs or original equipment manufacturers, Indian defence and logistics companies — is also eyeing the fast-growing electric vehicle (EV) market. It has launched two electric light commercial vehicles, and hopes to capture 7-10% market share.
“Production of these vehicles is scheduled to commence in the Q4FY24. JWL can clock higher margins as compared to competitors as the company has integrated operation(s) and bid selectively on new orders,” said brokerage Sharekhan, adding that it expects operating margins to improve to around 14.5% by FY25 from 12.2% in FY23.
What’s the upside ahead?
For the above reasons and more, the stock has been a multibagger with returns to the tune of 153% in the last one year, as per data on BSE. In the month of May, it was the most preferred small cap stock for multiple mutual funds according to reports by ICICI Direct as well as IDBI Capital.
There has been a shift from commercial vehicles to railways for transportation, and a demand for freight and passenger wagons has been going up.
“The government is coming up with 50,000 wagons in global tenders and each wagon costs around ₹70 lakh to ₹1 crore. It will be a game changer in the wagons business. The wagon manufacturers are in full swing mode for manufacturing and operating at full 70-90% capacity compared to 40% in past years,” said Arihant Capital.
Jupiter Wagons, apart from other listed entities like
“Its leading position in domestic wagon manufacturing along with focus in growing its railway brakes and light commercial electric vehicles business will give a decent medium to long-term growth prospects,” says Sharekhan as it expects a 33% upside from the current market price.
The key risks going ahead are lower spending by railway on wagon procurement, volatility in the prices of key raw materials like coal, sluggish demand from private wagon aggregators and lack of order for new business segments.
$JWL.NSE Key factors:• Rail freight demand: The demand for rail freight is expected to grow in the coming years, as the Indian government invests in improving the country's railway infrastructure. • Competition: Jupiter Wagons Ltd. faces competition from other Indian manufacturers of railway wagons, such as Titagarh Wagons Ltd. and Bharat Wagons Ltd.• Raw material prices: The prices of raw materials, such as steel and aluminum, have been rising in recent months. This can increase costs and reduce its margins.• Foreign exchange rates: USD-INR rate can affect JWL's costs, as it imports some of its raw materials.Risks:• The company's poor profit growth and low ROE are concerns.• The company is exposed to the cyclical nature of the railway industry.• Tough competition Overall, JWL is a well-managed company with a strong track record of growth. However, the company's poor profit growth and low ROE are concerns. Investors should carefully consider these factors before investing.
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