JAIBALAJI - Jai Balaji Industries Limited Share Price

In the Q4 FY25 earnings call for Jai Balaji Industries Limited, management provided an optimistic outlook for FY26, targeting revenue growth of 25% to 30%, with EBITDA margins projected in the range of 16% to 17%. They also expect DI Pipe production to surpass 4 lakh tons.

Aditya Jajodia, Chairman and Managing Director, highlighted that the company successfully expanded ductile iron pipe capacity to 5.04 lakh tons and plans to increase it further by 96,000 tons in FY26. The ferro alloys capacity is targeted to rise from 1.66 lakh tons to 1.9 lakh tons by Q1 FY27, while TMT bars will increase from 2.6 lakh tons to 3 lakh tons.

Management reported a significant reduction in net term debt, dropping from INR 871 crores in FY23 to INR 221 crores in FY25, leading to a strong net debt-to-EBITDA ratio of 0.25, outperforming their previous guidance of 0.6.

For FY25, production increased for Ferro Alloys (8%) and DI Pipes (17%), with a gross profit margin of 36% and EBITDA at 14%. However, revenue and EBITDA showed annual declines due to market sluggishness. Management underlined that the anticipated rebound in government ordering activity is expected to enhance financial performance moving forward.

Moving beyond existing product lines, Jai Balaji is diversifying into OPVC pipes with an initial investment of less than $2 million, while continuing to prioritize their core offerings of ductile iron pipes and specialized ferro alloys. They are also focusing on reducing working capital levels, which jumped during FY25 due to delayed government payments.

1. Question: Sir, you gave guidance for FY '24 regarding revenue. What's the guidance for FY '26 revenue and EBITDA?
   Answer: We have given guidance of a 25% increase in revenue for FY '26, along with an EBITDA margin range of 16% to 17%. In the previous financial year, our EBITDA margin was 14%.

2. Question: Sir, the DI Pipes production volume would be less in FY '25. Can you please explain the major reason for this?
   Answer: We achieved 282,000 tons in FY '25. Moving forward, our target for FY '26 is to produce 400,000 tons as per internal assessments, and I am confident we will meet that target.

3. Question: Could you highlight the reasons behind the delay in the Ferro Alloys expansion project to Q1 FY27?
   Answer: The project faced delays due to critical equipment from China not arriving on time. We needed to make modifications both on our end and theirs for innovative technology development, leading to this postponement.

4. Question: What is the expected capacity utilization for the Ferro Alloy segment going forward?
   Answer: We anticipate capacity utilization to remain around the same level, although slight reductions may occur as we focus more on specialized Ferro Alloy grades, which require some adjustments in production volumes.

5. Question: What's the current status of government orders and the outlook for FY '26?
   Answer: Government spending slowed post-election, which impacted orders. However, we expect a rebound in the FY '26 environment with the new budget, improving order books significantly in the coming months.

6. Question: Do you feel any green shoots being visible on the ground regarding the JJM from Q1 FY26?
   Answer: Absolutely. The recent increase in JJM budget indicates sufficient funds to meet demand. With the slowed spending signs from last year, the current budget should facilitate greater project execution moving forward.

7. Question: Can you elaborate on your strategy regarding OPVC pipes entry?
   Answer: Our entry into OPVC pipes is minimal and exploratory. The investment is small (around INR 25 crores), aimed at diversifying our offerings without affecting our main focus on DI pipes, which will remain our core business.

8. Question: What are your thoughts on the current demand for DI pipes in the market?
   Answer: Demand is recovering with expected order releases post-budget. Issues earlier had caused funds to be withheld, but now discussions indicate that we can expect an increase in orders soon.

9. Question: What are the EBITDA per ton figures for your segments?
   Answer: For FY '25: Sponge Iron was INR 4,000, Pig Iron INR 4,000, Ferro Alloy INR 20,000, Billets/MS ingot INR 2,000, TMT Bar INR 4,000 and Ductile Iron Pipe was INR 19,000.

10. Question: What is the capex target for the upcoming years?

Answer: We are targeting a capex of approximately INR 175 to 180 crores for this fiscal year, funded entirely through internal accruals, focusing on completing existing projects before considering any new expansions.