Fundamental Analysis of Jupiter Wagons: The Indian Government announced a budget of Rs. 2.4 Lakh Cr for The Indian Railways in its recent Union Budget. The railways, like the veins of the country, connect states, making it very economical to transport goods across India as well as to the ports, from where they will be exported to the world.

One can read about the major developments projected in this industry from the Industry Overview. Today, we will be talking about the Fundamental Analysis of Jupiter Wagons company which is set to benefit directly from the growth of the sector.

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Fundamental Analysis of Jupiter Wagons

We will look at what this Company does, how vast is its business, and what we can expect from this Industry. Then we will dive into the Company’s performance and fundamentally analyze it before we conclude. 

Company Overview

Jupiter Wagons Logo

Jupiter Wagons Ltd, a subsidiary of the Kolkata-based Jupiter Group was founded in 2006 and has since been a leading player in the railway wagon manufacturing industry. The Company began its operations by manufacturing freight wagons for the Indian Railways.

Today, it has built a diversified business around manufacturing for Indian Railways. Along with freight wagons, it also produces braking systems and marine containers for domestic and international use. 

Jupiter has manufacturing facilities in Jamshedpur, Indore, Jabalpur, and Baddi. The Company can manufacture over 8000 wagons annually. Along with this, it also has multiple partnerships, that allow it to bring the latest Tech to India. Let us take a look at some of these partnerships in Fundamental Analysis of Jupiter Wagons

  1. DAKO CZ: The Company’s Partnership with the 205-year-old Company allows Jupiter to manufacture train brake systems for the Indian Railways.
  2. LAF: The Partnership will allow the Company to manufacture drawbars, draught gear, Heavy-duty transaction devices, and buffers.
  3. Kovis Kivarna: The partnership gives the Company the expertise in manufacturing brake Discs, Axles, and gearboxes for rolling stock trains. 
  4. Talleres Alegra: A 108-year company with railway track material and equipment expertise. Jupiter will manufacture welded cast steel Crossings for Metro and other trains.
  5. CAF: The Company will be setting up a railway mass transit system for this Company, to manufacture metro trains.

Apart from these Companies, Jupiter also has partnerships with Tatravagonka Poprad, Budamar Logistics, and TSAW Drones. Jupiter’s Order book remains strongly supported by clients from across multiple industries like Commercial Vehicles, Railways, and Logistical Companies. As of FY23, the Company has a strong order book of Rs. 58,200 Cr, which would suffice the Company over the next three years.

Looking at the Company’s revenue segments, we realize that its revenue is strongly concentrated towards Railway wagons which brought in ~77% of the revenue and grew by ~99% in a year. A brief breakdown of the Company’s revenue segments as well as its growth is given below.

Segment(%)FY23FY22YoY Growth (%)
Railway Wagons78.69% ₹1,627.53 ₹819.31 98.65%
CMS Crossing1.72% ₹35.59 ₹37.64 -5.45%
CV Load Bodies & Components15.14% ₹313.15 ₹284.56 10.05%
Containers2.58% ₹53.43 ₹23.24 129.91%
Others1.86% ₹38.53 ₹13.58 183.73%
Total100.00% ₹2,068.23 ₹1,178.33 75.52%

Industry Overview

As mentioned initially, the government allocated Rs. 2.40 Lakh Cr towards railway-Capex. This is the highest-ever allocation, a 51% bump over the previous year. The allocation toward rolling stock was at Rs. 37,581 crore, double the previous year.

Indian Railways recorded its best-ever performance achieving an originating Freight loading of 1512 MT in FY23, as compared to 1418 MT achieved in FY22. There was an increased supply of Coal to Powerhouses, with 569 MT of coal being moved as against 485 MT in FY22. 

The Indian Railways placed the highest-ever order for about 72,000 wagons last year. Reports hint towards orders being placed for an additional 40,000 wagons. This is poised to increase the share of railways in freight transportation from about 27% – 45% by 2030.

The Dedicated Freight Corridor (DFC), which began operation in 2020 achieved the milestone of running one lakh trains. Till the start of the year 55,332 trains have been operated on the Eastern Dedicated Freight Corridor (EDFC) while 44,658 trains on the Western Dedicated Freight Corridor (WDFC).

The New Dadri-New Rewari section of the Western Dedicated Freight Corridor is a key milestone that will connect 4 Major Western states that are currently under construction. DFC is a vital initiative under the National Logistics Policy and aimed at reducing the cost of logistics from 15% (approx.) of the country’s GDP to 8% by 2030.

The freight infrastructure capacity augmentation by DFC is crucial in achieving the Indian Railways’ target of 3000 MT freight loading by 2027. This will certainly lead to an increase in traffic which will result in demand for wagons. 

Jupiter Wagons – Financials

Revenue & Net Profits

Jupiter Wagons posted revenues worth Rs. 2073 Cr in FY23, which increased by 75.45% from Rs. 1182 Cr in FY22. Out of the past 5 years, the Company posted a revenue de-growth in just FY20. However, since FY21 it has scaled its revenue so aggressively that it now maintains a Compound growth of 75.9% from FY19.

Net Profits increased by as much as 1.43x, increasing from Rs. 49.65 Cr in FY22 to Rs. 121 Cr in FY23. Profits of the Company have been extremely cyclical falling to a loss of 13 Lakh in FY20. The Company has recovered significantly since then. 

It should be noted that Jupiter Wagons remained a standalone company from FY19-21, hence its financials & metrics are reported in Standalone numbers. FY22&23 are reported in Consolidated format.

Fiscal YearNet Sales (In Crores)Net Profit (In Crores)
2023 ₹2,073.33 ₹120.67
2022 ₹1,181.74 ₹49.65
2021 ₹364.54 ₹12.30
2020 ₹129.03 ₹(0.13)
2019 ₹216.55 ₹88.67
4-Year CAGR75.90%3.00%

Profit Margins

The Company’s Operating Margins have remained extremely volatile with a low of 1.66% in FY20 to a high of 12.19% in FY23. The Company is yet to achieve stability in its margins, however, it reported its best-ever margins in FY23.

Net Profit Margins of the Company set a 4-year high of 5.83% in FY23. FY19’s Margins are inflated due to an extraordinary gain of Rs. 108 Cr. If we exclude that, then we can assume Jupiter Wagons to maintain margins in the 4%-5% range.

Fiscal YearOperating Profit Margin (%)Net Profit Margin (%)
202312.19%5.83%
20229.68%4.21%
202110.68%5.37%
20201.66%-0.11%
20195.51%41.09%
5 Year Average7.95%11.28%

Return Ratios

Jupiter’s Return on Equity was at 16.24% in FY23, which increased by 869 Bps from 7.55% in FY22. Compared to the 143% growth in Profits, the Company’s reserves increased by only 41%. This has resulted in the sudden Return growth.

Return on Capital Employed increased significantly from 11.79% in FY22 to 23.99% in FY23. Both Return ratios show signs of better utilization of the Company’s earnings being funded towards further growth.

Fiscal YearRoERoCE
202316.24%23.99%
20227.55%11.79%
20218.44%11.28%
2020-0.15%2.56%
2019618.41%91.45%
5 Year Average130.10%28.21%

Debt Analysis

Jupiter’s debt-to-equity ratio stands at 0.36x, which increased from 0.2x in FY22. This is due to a jump in current borrowings which have increased by ~1.4x since last year. During the same time, it has reduced its long-term debt by 32%.

Interest Coverage Ratio of the Company remains comfortably high at 7.94x, anything above 1.5x is considered a safe measure. Out of the 5 Years, the Company was at financial risk in FY20, when it suffered low EBIT making it harder to furnish its obligations.

Fiscal YearDebt / EquityInterest Coverage
20230.367.94
20220.205.16
20210.224.12
20200.520.59
20190.435.00
5 Year Average0.354.56

Key Metrics

The Key Metrics of Jupiter Wagons are given below.

ParticularsAmountParticularsAmount
CMP ₹400.35Market Cap (Cr.) ₹14,143
EPS ₹ 5.55Stock P/E (TTM)61.5
RoE21.77%RoCE26.19%
Promoter Holding72.37%FII Holding0.86%
Debt to Equity0.36Price to Book Value13.17
Operating Profit Margin12.19%Net Profit Margin5.83%

Jupiter Wagons – Future Plans

  1. Jupiter Wagons plans to expand the production of brake discs and brake systems for railway segments, like passenger coaches and Vande Bharat coaches. The Company aims to generate Rs. 500 Cr revenue from the break business in the 3-4 years.
  2. The Company also has plans to enter the Electric Vehicle segment, enabled by its  Partnership with American Green Power. It will start production in Q4FY24 manufacturing vehicles that can run a distance of 80-250 Km on a single charge.
  3. Its partnership with CAF will allow Jupiter to manufacture Metro Train wagons as well.

Conclusion

Jupiter Wagons is a stock that has been consistently scaling its earnings. It has a strong order book which shall suffice for the next 3-5 Years of operations. Even if the return ratios remain strong and coupled with low debt, this is the perfect mix for a strong stock.

The Company has a lot going well for it at the moment, even its international partnerships should complement its line of business. However, fuelled by this growth its stock has climbed by ~250% since January 2023, taking the stock to a sky-high PE of 61.5x.   

It is also important to consider that the Inventories and trade Receivables of the Company stand at Rs. 491 Cr & Rs. 213 Cr respectively. These assets collectively represent 43% of the Company’s total assets. Now having these assets locked up & not realised in cash reduces the efficiency of working capital for the Company.

Now would you bet on Jupiter Wagons at this valuation? Let us know in the comments below.                          

Written by Nasir Hussain

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