Market Leader in Water Control Gates with Healthy Revenue Visibility; Initiate with BUY
Key Triggers:
▶️ The company maintains a leadership position in water control gates with 60-70% market share in India and ranks 5th in the US. With US revenue clocking 28.3% CAGR over FY21-24, the company is poised to gain further market share and climb to No.3 position, as it builds a new plant in Pearland.
▶️ The company has diversified its product range through strategic acquisitions of MAHR, Sureseal India, Shivpad, Rodney Hunt and Waterfront UK.
▶️ Rodney Hunt clocked 28.3% CAGR over FY21-24. While Shivpad reported 18.3% CAGR over FY21-23, it delivered a strong performance in 1HFY25 with revenue rising by 133% YoY to Rs105mn and PAT margin rising to 11.7% from 2.2% YoY.
▶️ With major operations in India (40% revenue share), North & South America (35%) and RoW (25%), the company is rapidly expanding its global footprint. Notably, export markets are driving faster revenue growth compared to domestic operations.
▶️ The company’s products are approved by consultants and government authorities across Europe, the US, Middle East, Southeast Asia and Africa.
▶️ Leveraging its PQ credentials, the company aims to boost export revenue share to ~65% by FY27/FY28 and driving EBITDA margins towards 13%.
▶️ With its current manufacturing capacity, the company targets peak revenue of Rs8bn. However, with 3 plants set to commission between FY25 and FY27, the company sees clear revenue visibility through FY28 with at least 15-20% CAGR.
Thrust on Water Sustainability through Water Treatment – Huge Potential: Global water and wastewater treatment market is likely to clock 7.5% CAGR to $346bn in 2024 and ~$617bn by 2032 with the US alone is likely to account for $314bn by 2032.
Wide Product Offering and Diversification – Augur Well: While the company offers a wide range of water treatment equipment, it is poised to maintain its No.1 position in water control gates in India and increase its presence in other water treatment equipment space, to cash in on a significant share of the Rs100-110bn market opportunity.
Outlook & Valuation – Initiate Coverage with BUY and a Target Price of Rs800
We are bullish on the stock due to several key factors: (1) increasing revenue contribution and profitability of Rodney Hunt, USA; (2) greater product diversification, making the company a one-stop destination for all water treatment equipment; (3) foray into North and South America, with exports expected to contribute ~65% to total revenue by FY27/FY28, driven by higher margin; (4) expected turnaround in Shivpad Engineers from FY25 onwards; and (5) higher investments in water/wastewater treatment space. Thus, we initiate coverage on Jash Engineering with BUY and a Target Price of Rs800, valuing the stock at 40x of FY27E EPS.
https://www.thehindubusinessline.com/markets/share-market-nifty-sensex-live-updates-january-6-2025/article69064661.ece
