Jyoti CNC Automation made headlines with its Initial Public Offering (IPO) in January 2024. The company's IPO debuted with a notable premium of ₹84 per share, highlighting the market's excitement. Even a month post-listing, Jyoti CNC sustained the momentum, yielding a return of 30% since its listing. As of February 12, 2024, its stock price stood at ₹563.
The IPO raised ₹1,000 crore, with 75% reserved for institutional buyers, 15% for high-net-worth individuals (HNIs), and 10% for retail investors. The funds raised will be directed toward loan repayment, working capital needs, and other general corporate purposes.
Industry Overview: The Machine Tool Sector
Machine tools, particularly CNC (computer numerical control) systems, are crucial in industries ranging from aerospace to automotive. India's machine tool market is expected to grow at a compound annual growth rate (CAGR) of 11.5% from FY2023 to FY2027, driven by rising demand for precision, productivity, and cost-efficient manufacturing solutions.
CNC machines, which automate metal-cutting processes, are at the heart of this industry transformation. As the need for high-efficiency production systems grows, CNC machines will play a key role in driving India's engineering and manufacturing competitiveness across diverse sectors like defense, heavy machinery, consumer goods, and more.
Jyoti CNC Automation: Company Overview
Founded in 1991, Jyoti CNC Automation is India's third-largest CNC manufacturer, with a domestic market share of approximately 10% in FY2023. The company is also a global player, holding a modest share of 0.04% in the international CNC market in FY2022.
In 2007, Jyoti CNC acquired Huron Graffestaden S.A.S., a well-regarded French machine tool manufacturer known for its 5-axis machining technology. The acquisition strengthened Jyoti's presence in Europe, especially in high-tech precision machinery.
Product Range
Jyoti CNC's offerings span across CNC turning centers, turn-mill centers, vertical and horizontal machining centers, and advanced 4- and 5-axis machining solutions. Their products cater to entry-level to high-end needs, serving a diverse client base in sectors such as aerospace, automotive, defense, and electronics.
Financial Overview and Key Metrics
| Market Capitalization |
22765.1 |
Operating Profit Margin Qtr % |
26 |
| TTM PE Ratio |
105.6 |
Operating Profit Margin TTM % |
25.6 |
| Price to Book Ratio |
16.7 |
Relative returns vs Nifty50 quarter% |
-11.6 |
| Institutions holding % |
16.8 |
Relative returns vs Sector quarter% |
-7.2 |
| Revenue Growth Qtr YoY % |
73.9 |
ROE Annual % |
11 |
| Net Profit Qtr Growth YoY % |
475 |
RoA Annual % |
6.9 |
| Piotroski Score |
6 |
|
|
Here is a breakdown of Jyoti CNC's recent financial performance:
| Indicator |
CAGR 3 Yrs |
CAGR 5 Yrs |
TTM |
Mar '24 |
Mar '23 |
Mar '22 |
Mar '21 |
Mar '20 |
| Total Revenue |
38.3% |
8.2% |
1331.4 |
1197.6 |
860.4 |
686.5 |
453.1 |
576.3 |
| Operating Expenses |
33.9% |
6.5% |
996 |
917.7 |
711.4 |
569 |
382 |
486.5 |
| Operating Profit |
70.9% |
17.6% |
324.9 |
272.1 |
116.8 |
109.2 |
54.5 |
74.3 |
| Operating Profit Margin % |
23.6% |
8.7% |
|
22.72% |
13.57% |
15.91% |
12.04% |
12.90% |
| Total Expenses |
28.7% |
6.1% |
|
1010.7 |
808.3 |
660.7 |
474.5 |
574.4 |
| EBIDT |
58% |
15.3% |
|
279.9 |
149 |
117.5 |
71 |
89.8 |
| Interest |
-0.2% |
2.4% |
52.9 |
65.8 |
71.2 |
65.2 |
66.1 |
62 |
| Depreciation |
1% |
2.1% |
28.3 |
27.2 |
25.7 |
26.5 |
26.4 |
25.9 |
| Profit Before Tax |
- |
28% |
245.2 |
186.9 |
52.1 |
25.8 |
-21.4 |
1.9 |
| Tax |
- |
18.9% |
62.4 |
46.9 |
12.8 |
6.6 |
-1.5 |
-7.2 |
| PAT Before ExtraOrdinary Items |
- |
32.1% |
|
140 |
39.3 |
19.3 |
-19.9 |
9.1 |
| Net Profit |
- |
32.1% |
182.8 |
140 |
39.3 |
19.3 |
-19.9 |
9.1 |
| Net Profit Margin % |
- |
21.8% |
|
11.76% |
4.74% |
2.83% |
-4.55% |
1.62% |
| EPS |
- |
-9.2% |
|
7.3 |
13.3 |
6.5 |
-6.7 |
3.1 |
The company turned profitable in FY23 but had shown losses in FY21 and FY22. Even with a net profit in FY23, when adjusting for an exceptional item of ₹304.50 million, the company still posts an underlying loss. Debt remains a key challenge, with total borrowings of ₹8,214 million as of September 2023, resulting in a debt-to-equity ratio of 3.25.
Shareholding Pattern
| in % |
Mar'24 |
Jun'24 |
Sep'24 |
| Promoter |
62.55 |
62.55 |
62.55 |
| Public Shareholding |
37.45 |
37.45 |
37.45 |
| Institutions |
11.64 |
11.45 |
16.79 |
| Non-Institutions |
25.81 |
26 |
20.66 |
Order Book and Clientele
As of September 30, 2023, Jyoti CNC's order book stood at ₹33,153.26 million, with orders from key industries including aerospace, defense, automotive, and electronics manufacturing. Notable clients include ISRO, Bharat Forge, Tata Advanced Systems, Bosch, and Turkish Aerospace, among others.
| End-User Industry |
Order Book (₹ mn) |
| Aerospace & Defence |
18960.6 |
| Auto & Auto Components |
4056.84 |
| General Engineering |
3959.03 |
| Dies & Moulds |
1542.97 |
| EMS |
3049.17 |
| Others |
1584.66 |
Strategies for Future Growth
Jyoti CNC aims to expand its footprint in aerospace and defense, both domestically and internationally. The company is also looking to diversify its customer base and strengthen its presence in other industries, such as electronics and automotive. Reducing debt through IPO proceeds is part of the long-term strategy to improve profitability and capital efficiency.
Peer Comparison
| Stock |
Current Price |
PE TTM Price to Earnings |
Market Capitalization |
Dividend yield 1yr % |
Net Profit Qtr |
Net Profit Annual YoY Growth % |
Operating Revenue Qtr |
Revenue Growth Qtr YoY % |
Price to Book Value |
| Jyoti CNC Automation |
992.9 |
104.77 |
22580.84 |
0.00% |
50.92 |
901.73% |
361.84 |
73.85% |
16.55 |
| Cummins India Ltd. |
3370.15 |
51.11 |
93420.56 |
1.13% |
462.61 |
40.10% |
2315.56 |
4.39% |
14.13 |
| GE T&D India Ltd. |
1679.4 |
149.64 |
43000.45 |
0.12% |
134.54 |
12251.01% |
958.34 |
33.55% |
34.6 |
| 3M India Ltd. |
33748.65 |
62.19 |
38018.19 |
2.03% |
157.15 |
29.36% |
1046.57 |
-0.29% |
17.71 |
| Elgi Equipments Ltd. |
596.4 |
58.29 |
18900.45 |
0.34% |
72.84 |
-15.89% |
801.06 |
10.66% |
11.73 |
| LMW Ltd. |
15778.45 |
57.95 |
16856.12 |
0.48% |
11.02 |
-2.70% |
672.96 |
-43.49% |
6.23 |
| KSB Ltd. |
829.45 |
66.31 |
14435.68 |
0.42% |
68.1 |
14.22% |
646 |
9.25% |
11.09 |
While Jyoti CNC stands out for its industry presence, the P/E ratio of 324 raises concerns given its low profitability and high debt levels compared to peers like Elgi Equipment and Lakshmi Machine Works, which have more stable financials.
SWOT Analysis
| Strengths |
Weaknesses |
| - Established Market Position: Ranked as the third-largest CNC manufacturer in India with a market share of around 10%, Jyoti CNC has a well-recognized brand presence in the domestic market. |
- High Debt Levels: With a debt-to-equity ratio of 3.25 as of September 2023, the company faces high leverage, which restricts cash flow for operational growth and can increase financial risk. |
| - Diverse Product Portfolio: Offers a wide range of CNC machines, from entry-level 2-axis to high-end 5-axis machines, catering to various industry needs. |
- Limited Profit Margins: Despite recent profitability, net profit margins remain low due to high operational costs and interest expenses, impacting overall financial health. |
| - Strong R&D Capabilities: Has R&D centers in India and France, enabling technological advancements and product innovation, enhancing competitive advantage. |
- Dependency on a Few Large Clients: Heavy reliance on key clients from sectors like aerospace and defense can make the company vulnerable to fluctuations in these industries. |
| Opportunities |
Threats |
| - Growing Demand for CNC Machines: With the Indian manufacturing sector’s growth and increasing automation, there is rising demand for CNC machines, creating expansion opportunities. |
- Intense Market Competition: Competes with established players like Lakshmi Machine Works and Elgi Equipments, potentially limiting market share and pricing power. |
| - Expansion in Aerospace and Defense: The company’s strategic focus on increasing its footprint in aerospace and defense can lead to new revenue streams, given the expected growth in these sectors. |
- Volatility in Raw Material Prices: Fluctuating prices for metals and electronic components can impact production costs, affecting profitability. |
| - Geographical Expansion: Plans to diversify its customer base and reach into international markets can help mitigate domestic market risk and open new growth avenues. |
- Regulatory Risks: Changes in government regulations or import-export policies could impact operations and profitability, especially in international markets. |
Conclusion
Despite its strong market position and broad product portfolio, Jyoti CNC Automation's financials, particularly its high debt and low profit margins, pose risks for investors. With a high P/E ratio compared to peers, the valuation seems steep. Investors should carefully weigh the potential for future growth against the company's current financial constraints before considering it as a long-term investment option.
Discalimer!
The content provided in this blog article is for educational purposes only. The information presented here is based on the author's research, knowledge, and opinions at the time of writing. Readers are advised to use their discretion and judgment when applying the information from this article. The author and publisher do not assume any responsibility or liability for any consequences resulting from the use of the information provided herein. Additionally, images, content, and trademarks used in this article belong to their respective owners. No copyright infringement is intended on our part. If you believe that any material infringes upon your copyright, please contact us promptly for resolution.