Stock to buy: Despite a sell-off in key benchmark indices, small-cap firm JTL Industries managed to reach a new high of 249.40 per share on the NSE during Friday trading. Despite missing market expectations in its Q2 results 2023, the small-cap firm was able to achieve so.
Interestingly, some reputable brokerages anticipate that the small-cap stock will continue to hit new highs in the coming sessions. Axis Securities has assigned the company a buy rating with a target price of ₹265 in the near term.
What is Fundamental Signal
According to the Axis Securities analysis, JTL is on track to increase its capacity to 1MT by FY25, which is one of the reasons for awarding this small-cap stock a “buy” rating. Targets for VAP share are 40% in FY24 and 50% in FY25. About 50% of the additional 0.4MT capacity by FY25 will have Direct Forming Technology (DFT), which will improve productivity and capacity utilization. Additionally, this will expand the company’s SKU offering. In Q3FY24, the DFT will go online, increasing VAP share in H2FY24. In FY24, the management projects sustainable EBITDA/t of between 4,800 and 5,300/t.
The brokerage provided the following prognosis and guidance for small-cap companies: “Guidance for sales volume baseline growth for FY24 is 30% on a YoY basis (minimum which can be surely achieved)”. The company has predicted 0.33 MT in FY24 vs. 0.24 MT in FY23, which amounts to 40% growth YoY and 44% utilization at the year-end capacity of 0.75 MT. The company will seek to exceed the 30% growth target. Since Q4FY24 will see a disproportionate volume expansion, this is less than the industry standard of 60%. For FY24, the EBITDA/t forecast is from 4,800 to 5,300/t.
JTL Industries’ share price objective
Axis Securities advised stock market investors on JTL Industries shares, saying, “We maintain our BUY rating on the stock and value JTL at 23x (from 22x) its FY25 EPS (unchanged) to arrive at our 1-year forward target price of 265/share, implying a 12% upside potential from the CMP.”
