Reviews

In this edition, we have reviewed JTL Industries Ltd and Punjab National Bank. We suggest our reader-investors to HOLD JTL Industries Ltd and Punjab National Bank 

We had recommended JTL Industries Ltd. in Volume 39, Issue No. 5 dated January 29, 2024 — February 11, 2024, under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹255. We had recommended the stock based on its strong position, demand, and growth in the export market. JTL Infra, the flagship company of the Jagan Group, is based in Chandigarh and has a steel mill in Dera Bassi, Punjab. The company caters to both domestic and overseas markets and has been recognised as a ‘Star Export House’ by the Government of India. JTL has a strong commitment to technical expertise and innovative product development. 

With an emerging global network and a reputation for quality products, JTL has access to vast resources, including in-house specialists in material technology and a dedicated team of industry veterans. Its growing presence in Europe, the Middle East, and America provides insight into emerging and mature steel markets. In Q1FY25 on a consolidated basis, the company’s revenue increased by 2.1 per cent YoY to ₹515.38 crore compared to `504.8 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 10.61 per cent. The net profit stood at ₹30.7 crore compared to ₹25.37 crore, a YoY increase of 21.02 per cent, sequentially rising by 3.92 per cent from ₹29.55 crore. 

At TTM, the shares of JTL Industries are trading at a PE of 38.6 times, which is higher than its three-year median PE of 29.7 times, whereas the industry PE stands at 28.2 times. If we look at its PBV, it is currently at 5.29 times, which is higher than the industry PBV of 3.55 times. The company has a three-year average return on equity (ROE) of 25.5 per cent and a return on capital employed (ROCE) of 32.3 per cent. 

JTL Industries has acquired 70 per cent stake in Nabha Steel and Metals and launched the first phase of the company, achieving sales of 10,000 tonnes. The company is confident about its market position and demand, expecting normalisation post-elections and a boost in government orders after the budget. The export market is experiencing good growth, with a significant jump in exports in the recent quarter. JTL is positioned to benefit from the shift to a China Plus One model in global trade and anticipates good growth in the export market with the expansion of SKUs and product range. The company is confident in achieving a 30 per cent year-on-year revenue growth and 40 per cent VAP share, with no delays in capacity expansion plans. Hence, we recommend HOLD. 

We had recommended Punjab National Bank in Volume 39, Issue No. 5 dated January 29, 2024 — February 11, 2024, under the ‘Low Price’ segment. The recommended price for the stock was ₹102.14. We had recommended the stock based on a strong financial performance, improved asset quality, and a strategic focus on retail and MSME. Punjab National Bank, India’s first ‘swadeshi’ bank, was established in 1895 and was the first bank managed by Indians with Indian capital. The financial year 2019-20 saw the amalgamation of the Oriental Bank of Commerce and United Bank of India with Punjab National Bank. The bank aims to provide hassle-free and convenient banking services, leveraging technology to deliver the best customer experience. In Q1FY25, on a consolidated basis, its revenue increased by 13.52 per cent YoY to ₹29,144.54 crore compared to ₹25,672.85 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 1.61 per cent. The PBIDT excluding other income increased by 15.39 per cent to ₹18,536.31 crore YoY as compared to ₹16,064.38 crore from the previous year’s same quarter, while sequentially increasing by 1.81 per cent. The net profit stood at ₹6,653.63 crore compared to ₹5,934.21 crore, a YoY increase of 12.12 per cent, while sequentially increasing by 2.37 per cent from ₹6,499.61 crore. 

At TTM, Punjab National Bank is trading at a price-to-adjusted book value of 1.09 times which is higher compared to its peers. The bank has a return on assets (ROA) of more than 0.59 per cent. The company’s net interest income increased by 10.2 per cent to ₹10,476 crore while the gross NPA decreased from ₹70,899 crore to ₹51,263 crore, resulting in a decrease in the gross NPA ratio from 7.73 per cent to 4.98 per cent. Its net NPA decreased from ₹17,129 crore to ₹5,930 crore, while the provision coverage ratio improved from 89.83 per cent to 95.90 per cent. 

The bank’s gross NPA has been revised to around 4 per cent by March 2025, with credit cost guidance from 1 per cent to 0.5 per cent for the year. The bank’s recovery target is slated at ₹18,000 crore, with expectations of strong performance despite the election’s impact on recovery in Q1. The bank’s capital position is 15.79 per cent, with Tier I capital at 10.95 per cent. The operational efficiency has improved from 56.09 per cent in March 2024 to 53.28 per cent in June 2024, aided by reduced wage revision provisions. The bank’s management is optimistic about the future, highlighting strong financial performance, improved asset quality, and a strategic focus on retail and MSME sectors. Hence, we recommend HOLD.