JTL Industries Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record H1 EBITDA despite inventory hit: H1 FY25 EBITDA reached a record ₹81.5 crore, even after a ₹900-930/ton inventory loss in the primary segment compressed margins. Without that loss, EBITDA per ton would have been ₹4,200-4,300.
• Volume growth guidance intact at 30%: Management reaffirmed its FY25 sales volume target of 4.4-4.5 lakh tons and expects 30% year-on-year volume growth for FY26, supported by a good export order book and an expected demand pickup.
• Mix shift to high-margin VAP is the core thesis: Value-added products, defined as anything above ₹7,000 EBITDA per ton, are on track to hit 40% of mix by year-end FY25 and 50% once full 0.2 crore-ton capacity is installed. The new DFT line, with ₹7,000-8,000+ EBITDA per ton, is the primary driver.
• Nabha integration closes a structural gap: Nabha will become a subsidiary in Q3, and its output will shift from market sales to captive backward integration by mid-Q3, improving raw material security and margin control.
• What to watch next quarter: Whether EBITDA per ton normalizes to the promised ₹4,500 level, the pace of DFT ramp-up from Q3 trial runs, and any demand lift from government orders in the secondary market.

Volume Growth & Demand Drivers

• 30% growth commitment: Management expects 30% year-on-year volume growth for both FY25 and FY26, with a minimum 10% sequential volume increase in each of Q3 and Q4 FY25.
• Export engine firing: H1 exports were among the highest ever, up 104% year-on-year, with better realizations than domestic sales. H2 exports are expected to be another all-time high, supported by a strong order book.
• Structural demand tailwinds: Demand is driven by domestic infrastructure, replacement of low-income housing materials, bamboo scaffolding substitution, changing regulations, and rising disposable income.
• Secondary market bottomed: Management sees no further price correction in the secondary market, expects demand to pick up, and anticipates government orders soon.
• No price war participation: The company does not offer discounts beyond what larger players offer and did not pass on any extra discounts this quarter, protecting realizations.

Pranav Singla: "We don't see any further correction happening as of now. I think the market has bottomed out."

Margin Structure & the Inventory Loss

• Inventory loss mechanics: An inventory loss of ₹900-930 per ton hit the primary segment this quarter because several imported coil shipments from Korea and Japan arrived late in Q2, just as prices dipped. The secondary segment, being a daily buy-sell market, carried negligible inventory loss.
• Conversion margin parity: The underlying conversion margin is identical for primary and secondary segments. The entire Q2 margin divergence came from inventory losses in primary alone.
• Strategic inventory build: Inventory days rose because management chose to accumulate coils at what it saw as bottomed-out prices, anticipating stable or rising realizations. October realizations have already shifted upward.
• Margin resilience factors: EBITDA per ton stayed elevated despite the inventory headwind because of four structural advantages: a daily-turn secondary market, 104% higher H1 exports at superior margins, back-to-back import-for-re-export without duty or BIS friction, and proximity to port.
• Normalization expected: Management expects EBITDA per ton to return to approximately ₹4,500 from Q3 onward as the inventory loss washes through.

Pranav Singla: "The conversion that we get in primary and secondary is just the same. It's just that, as of this quarter, we faced inventory losses in the primary segment and nothing in secondary."

Value-Added Products & the DFT Bet

• VAP defined by margin, not product: VAP is defined strictly as any product delivering above ₹7,000 EBITDA per ton. The DFT line, producing large-diameter structural tubes, is expected to generate ₹7,000-8,000+ EBITDA per ton.
• DFT timeline and ramp: Machinery is already at the Mangaon plant, installation is underway, and trial runs begin by end of November. The line will be added by Q3-end FY25, with Q4 utilization at roughly 25% of peak.
• DFT flexibility advantage: Unlike traditional mills, DFT allows rolling adjustments within three to four hours, enabling rapid response to demand shifts without significant inventory build-up.
• VAP mix trajectory: Year-end FY25 VAP share is maintained at 40%, driven entirely by DFT. However, VAP share will dip below 40% in FY26 as multiple CAPEX projects add black pipe capacity faster than VAP capacity, before climbing to a target 50% once the full 0.2 crore-ton capacity is installed.
• Q4 margin uplift from DFT: DFT is expected to add approximately 10% to EBITDA per ton in Q4 FY25 as initial volumes come online.

Pranav Singla: "When I mention my VAP products, they are the only products that provide me with an EBITDA per ton of Rs. 7,000 plus. So, with that guidance, I still maintain a 40% guidance for year-end."

Capacity Expansion & Integration

• Million-ton milestone by year-end: The company aims to reach 0.1 crore tons of capacity by end-FY25, with Raipur already doubled from 1 lakh ton to 2 lakh tons and new machinery commissioned to take total capacity to 7 lakh tons.
• Nabha integration timeline: Nabha will join as a subsidiary within Q3 FY25, and its output will be fully utilized for captive backward integration by mid-Q3. Modifications to align Nabha's production with JTL's specifications are mostly complete, and JTL has already started accepting material.
• No overseas expansion until 2027: Management's focus through 2027 is completing all brownfield expansions in India. The strategy is to first offer a full product range domestically, then evaluate specific export markets.
• Forward and backward integration roadmap: By 2027, the company plans to enter narrow-width galvanizing, CR lines, wider galvanizing for sheet manufacturing, and color coating, moving toward a 0.2 crore-ton total capacity.
• CAPEX outgo: H2 FY25 CAPEX is pegged at ₹140-150 crores, stretchable to ₹200 crores, with full-year CAPEX at approximately ₹250-300 crores.

Dhruv Singla: "Our aim is to expand our SKUs and offer a full range of products in the Indian market first, and then consider specific markets abroad if they make sense to us. As of now, frankly, we have not thought in that direction."

Competitive Position & Export Dynamics

• Protected export markets: India primarily supplies galvanized steel tubes to Europe, the UK, Africa, and Australia, where anti-dumping duties are already applied to Chinese products. Chinese competition is absent from these markets, and Chinese product is no longer as price-competitive due to raw material quotations.
• Import-for-re-export advantage: The company can import coils without paying import duty for re-export purposes, and no BIS requirements apply to re-exported product, creating a frictionless channel for high-margin export sales.
• Primary-secondary segmentation: The secondary segment serves lower thicknesses and low gauges where primary players have high realization expectations, creating a parallel market rather than direct competition. Secondary cannot compete in higher thickness or larger diameter segments.
• Price delta stability: The current delta of ₹5 per kg (rising to ₹8-9 for thinner sizes) between HRC and secondary product is sufficient to maintain healthy EBITDA per ton.
• Return discipline: The industry thumb rule is a three-year payback on fixed costs, and management uses this as its investment hurdle.

Dhruv Singla: "The thumb rule is in our industry we look at a return of three years on the fixed costs."

Guidance & Commitments

Key Metrics