JTL Industries Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Volume surged 56%, revenue lagged: Sales volume grew 56% YoY in Q2, but revenue rose only ~37% because realizations dropped 10% alongside HRC prices. The company is a converter, not a steel producer, so top-line growth is not the right yardstick.
• EBITDA per tonne reset to a stable base: H1 EBITDA per tonne fell to ~₹4,600 from ~₹6,100 last year, but last year's figure included non-recurring inventory gains. Management calls the current number the actual stabilized level and guides to a ₹4,800–₹5,300 range for the full year.
• VAP share dipped on mix, not margin: Value-added product share fell from 50% to 40% YoY because smaller-size, higher-margin orders are light in weight and do not pull metric tonnage. EBITDA margins held stable despite the percentage drop.
• DFT is the margin catalyst, arriving Q4: Direct Forming Technology will raise capacity utilization from ~60% to a 70–75% range and increase VAP share, with every quarter-on-quarter improvement in EBITDA per tonne promised once it is operational.
• What to watch next quarter: Whether the guided H2 volume of 3.2–3.5 lakh tonnes materializes, the pace of VAP share recovery toward the 40% year-end target, and any stabilization in steel prices that could lift realizations.

Volume Growth & Capacity

• 56% volume growth, 55% in H1: Driven by government infrastructure push, new capacity additions in Raipur, Maharashtra, and Mandi, and a structural demand-supply gap that management says lets players like JTL "easily triple up."
• H2 volume target set high: Management expects 3.2–3.5 lakh tonnes for the full year, implying 30–35% YoY growth, with Q3 and Q4 historically stronger due to festive season and new tender cycles. No demand slowdown is anticipated.
• Capacity utilization at 60% is structural, not weak: The same machinery runs sizes from half-inch to 3 inches. Running one size could exceed 100% utilization, but the company must serve a full product kitty to be a one-stop solution. DFT will reduce roll-change time for bigger sizes and lift utilization toward 70%.
• Market share ambition: From 3% in 2019 to 9% now, management expects share to double to 18–19% after the Raipur and Mangaon expansions add 4 lakh tonnes, taking total capacity to 0.1 crore tonnes by FY25.

Pranav Singla: "There is always a shortfall right now. That's the major reason players like us can easily triple up. As we have mentioned to gain a capacity of a million tonne by FY25, these are the major drivers that encourage us to increase capacities and expand in all geographies."

EBITDA & Margin Dynamics

• EBITDA per tonne reset explained: H1 FY24 EBITDA per tonne of ~₹4,600 compares with ~₹6,100 in H1 FY23, but the prior year included inventory gains from volatile steel prices. This year has no inventory gain or loss, so the number reflects stabilized operations.
• Full-year guidance: ₹4,800–₹5,300 per tonne: Based on a value-added kitty of 45–50%. Management says it always strives for better numbers but must live with market prices.
• Margin profile, not top line, is the focus: Realizations depend entirely on HRC prices, over which the company has no control. The correct growth measure is profit and EBITDA added, and the company intends to maintain its margin profile through volatile cycles.
• No HRC hedging possible: As a processor, JTL cannot fundamentally hedge HR coil price fluctuations. When prices rise, it stocks up and captures advantages; when prices fall, it becomes leaner. This is reflected in inventory days dropping from 45 to 28 and working capital days improving from 71 to 57.

Dhruv Singla: "We have to live with all those things and the guidances that we provide are between EBITDA of a value-added kitty of about 45% to 50%. Then, the guidance is around Rs. 4,800 to Rs. 5,300 of EBITDA per tonne. These are guiding numbers. We always strive to give better numbers, but we also have to live with the market and see where the market is taking us."

Value-Added Products & DFT

• VAP share dip is a tonnage illusion: VAP percentage fell from 50% in Q2 FY23 to 40% in Q2 FY24 because orders this quarter were of smaller sizes. Smaller sizes command better margins but are light in weight, so metric ton volume does not reflect the value. Quantity-wise, VAP increased by 4,000 tonnes.
• DFT technology arriving Q4: Direct Forming Technology enables production of various hollow section pipe sizes without roll changes, increasing efficiency and capacity utilization. Management expects average utilization on DFT lines to reach 75–80%, lifting overall utilization from ~60% toward 70%.
• EBITDA per tonne trajectory tied to VAP: As VAP share increases with DFT, every quarter-on-quarter should see an increase in EBITDA per tonne. The VAP kitty includes galvanized pipe and solar structures as major products.
• Year-end VAP target: 40%, then 50% by FY25: The company is growing in a phased manner, increasing black pipe capacity simultaneously each quarter, so the percentage mix takes time to shift even as absolute VAP tonnage rises.

Pranav Singla: "The EBITDA per tonne is totally dependent on the share of VAP. And as we go ahead, we have already mentioned that we are bringing in DFT technology. After bringing DFT technology, our VAP share is further going to increase. As the VAP share is going to increase, every quarter on quarter you should see an increase in EBITDA per tonne."

Realizations & Revenue

• Realization fell 10% YoY: Average realization dropped from ~₹70,000 per tonne in Q2 FY23 to ₹62,000 in Q2 FY24, entirely driven by HRC price movements. Revenue grew ~37% against 56% volume growth for the same reason.
• H2 realization may inch up: Management noted some price increases anticipated at the beginning of the current month, and if the trend continues through the festive season, realization should go a little higher, though no exact number was committed.
• Pricing versus peers: For commercial-grade black pipe, pricing is similar to key players. Compared to APL Apollo, management stated "we would have a similar pricing." For value-added products, JTL maintains its own pricing and does not discount against others' price lists.

Balance Sheet & Expansion

• ₹384 crores raised via convertible warrants: Fundraising supports the capacity expansion plan without increasing long-term debt. Short-term borrowings rose in line with working capital leverage.
• Land bank supports future growth: 110+ acres in Mangaon (only 15–20% covered) and 35 acres in Raipur (only 50% covered) provide room for further expansion beyond the current plan.
• Capacity commercialization update: Of the 2 lakh tonnes targeted, 1,86,000 tonnes have been commissioned and 14,000 tonnes remain pending. First sales from the next 2 lakh tonnes are expected in Q1 FY25, with the final 2 lakh tonnes starting in Q1 FY26.
• Government project share held steady: Only the Dera Bassi plant caters to government orders, and management does not want to increase the government proportion. No capacity addition is planned at Dera Bassi, and no land bank is available there.
• International sales target: 15% of revenue: Up from the current 9%, supported by the Mangaon and Raipur expansions, which are more cost-effective and better positioned for exports.

Guidance & Commitments

Key Metrics