Jyoti CNC Stock Up By 177% In 6 Months: What’s Driving This Rally?

Jyoti CNC Stock

You know, if you had invested in Jyoti CNC Automation Limited (NSE: JYOTICNC) 6 months ago, you’d be smiling right now. Yes! The Jyoti CNC stock has skyrocketed by an astonishing 177% in just a few months.

Jyoti CNC Stock

So, what’s fueling this remarkable rally? 

Let’s thoroughly look into the factors that have driven this surge, making Jyoti CNC a standout performer in the market. Also, we will discuss its negative aspects and suggest what you should do as an investor.

Here we go!

(A) Reasons: What’s driving the Jyoti CNC Stock rally?

The following points describe some of the crucial reasons responsible for this stock rally-

(A.1) Revenue Growth

First and foremost, revenue growth is a crucial driver. Jyoti CNC reported a revenue growth of 22.12%. This might sound like just a number, but in the business world, it signifies robust health and a well-executed strategy. If you look at the balance sheet of Jyoti CNC stock, you’ll see that its operating revenue in FY23 was Rs.500 crore.

Let me give you a brief overview of the financials of Jyoti CNC Automation Limited-

Financial AspectsDetails
Operating RevenueRs.500 crore
EBITDA+4.09%
Networth+17.83%
Debt/Equity Ratio1.29
Return on Equity8.13%
Total Assets+19.58%
Fixed Assets-0.68%
Current Assets+24.03%
Current Liabilities+35.57%
Trade Receivables-29.68%
Trade Payables67.27%
Revenue Growth and Financials of Jyoti CNC Automation Limited

When a company consistently increases its revenue, it means it’s selling more products or services, gaining market share, and possibly expanding into new markets. For investors, this is a green flag, indicating that the company is on a positive trajectory.

(A.2) Strong Performance

Then, there’s the stock performance itself. On June 18, 2024, Jyoti CNC’s stock not only outperformed the sector but also the broader market by 3.05%. It hit a new 52-week and all-time high of Rs.1,223. Such milestones are not achieved by luck. They reflect the company’s strong fundamentals and effective management strategies. 

For you as an investor, seeing a stock reach new highs can be a confirmation of the company’s potential.

(A.3) Market Sentiment

Market Sentiment of Jyoti CNC Stock

Positive market sentiment plays a pivotal role too. With Jyoti CNC’s impressive revenue growth and overall performance, investors are showing increased confidence. This is evident from the higher price-to-sales (P/S) ratio of 17.1x, which is above the industry average. Essentially, investors believe that the company’s future sales and profits will justify paying more today. It’s a classic case of market optimism driving up stock prices.

(A.4) Debut Performance

Now, let’s talk about Jyoti CNC’s stock market debut. When a company goes public, its initial performance can set the tone for its future in the stock market. Jyoti CNC made a solid entry in January 2024. Its shares were listed at Rs.372, which was a 12% increase over its issue price of Rs.331 per share on the BSE. 

But guess what? 

The stock didn’t stop there. It surged by nearly 29% to Rs.426. This kind of debut indicates strong investor interest and confidence, providing a firm foundation for future growth.

(A.5) Industry Demand

The demand for CNC machines is another significant factor. Jyoti CNC has a diverse portfolio, including-

  • CNC Turning Centers
  • CNC Turn Mill Centers
  • CNC Vertical Machining Centers (VMCs)
  • CNC Horizontal Machining Centers (HMCs) 

They serve a broad range of industries, from aerospace and defense to automotive and general engineering. Companies like the Indian Space Applications Center – ISRO and Tata Advanced Systems are part of their prestigious customer base.

Why is this important? 

The global CNC machine market is expected to grow at a CAGR of 10.3% from 2023 to 2027. This growth is driven by the increasing adoption of automation and advanced software solutions in key industries. Simply put, the demand for CNC machines is on the rise, and Jyoti CNC is well-positioned to capitalize on this trend.

(A.6) Order Book

And let’s not forget the order book. A strong order book is a clear indicator of future revenue and profitability. Jyoti CNC boasts an impressive order book of Rs.3,310 crores to be executed over the next few years. 

This is a huge deal!

It means the company has a substantial pipeline of future work, ensuring steady revenue streams and financial stability. Analysts at Reliance Securities are optimistic, noting that this strong order book, coupled with the company’s strategic positioning in the market, fits perfectly for its future.

(A.7) Financial Performance

Finally, the company’s financial performance adds to its appeal. Jyoti CNC recently turned profitable in FY23 and H1 in FY23. In FY23, they reported an exceptional gain of Rs.30.4 crore due to a waiver of a loan. Becoming profitable is a significant milestone for any company, as it demonstrates financial health and operational efficiency. 

For investors, this profitability signals a reduced risk and a higher potential for returns and has led to a stock rally.

Wrap-Up

There you go! The rally of Jyoti CNC Automation’s stock is not just a fluke. It’s driven by solid revenue growth, strong market performance, positive market sentiment, a successful market debut, increasing industry demand, a robust order book, and a sound financial performance. All these factors combine to paint a promising picture for the company’s future.

As you keep an eye on the stock market, Jyoti CNC Automation is definitely one to watch. Its impressive performance over the past year might just be the beginning of an exciting growth story. 

So, if you’re looking for potential investment opportunities, Jyoti CNC could be a worthy contender. But don’t forget to look at the flip side too!

Note: Here is another interesting fact. Apart from Jyoti CNC Automation Limited, several other companies have witnessed a stock rally too. Some of them are-

(B) The Flip Side of Jyoti CNC Automation Limited

Flip Side of Jyoti CNC

You know, while Jyoti CNC Automation Limited has shown impressive stock performance, it’s crucial to consider the potential risks and challenges-

  • Excluding Exceptional Gains: If you exclude the exceptional gains of Rs.30.4 crore from a loan waiver in FY23, the company actually incurred losses of Rs.15.34 crore. This raises concerns about consistent profitability.
  • Debt Concerns: The company has a net debt of Rs.650 crore and plans to repay Rs.400 crore using IPO proceeds. High debt levels can strain finances and increase financial risk.
  • Delivery and Execution Risk: Jyoti CNC relies on suppliers like Siemens and Mitsubishi for 30% of its components. Any disruptions here can significantly impact its delivery capabilities.
  • Declining Exports and Subsidiary Losses: The company’s exports have been reducing, and its subsidiaries have incurred losses for FY21, FY22, FY23, and the period ending September 2023. This indicates underlying issues and management challenges.
  • Financial Hiccups and High P/E Ratio: Past losses and a negative return on equity are concerns, and the high P/E ratio of 324.5x versus the industry average of 50x suggests the stock might be overvalued, amplifying risk.

In short, while Jyoti CNC shows promise, these significant risks should be carefully considered before investing.

(C) What should you do with Jyoti CNC Automation Limited Stocks?

What should the investors do with Jyoti CNC stocks_

Let’s simplify your options based on Jyoti CNC’s positives and negatives-

(C.1) Buy Jyoti CNC Stocks

Consider buying if you believe in the company’s growth potential. They’ve shown strong revenue growth and have a hefty order book of Rs.3,310 crores. Their diverse customer base in the aerospace and automotive sectors also bodes well. Buying now could pay off if you think they’ll capitalize on the growing CNC machine market.

(C.2) Sell Jyoti CNC Stocks

Selling might make sense if you’re worried about risks. Despite recent profits, excluding one-time gains shows underlying losses. They have a substantial debt of Rs.650 crore, declining exports, and subsidiaries that keep losing money. If you’re cautious about these issues or think the stock is overvalued, selling could prevent potential losses.

(C.3) Hold Jyoti CNC Stocks

If you’re unsure, holding might be best. They do have strengths like a strong order book and strategic market position. Holding lets you wait for clearer signs of improvement. If you believe management can tackle debt and operational challenges, holding could lead to gains when conditions improve.

To decide, think about your tolerance for risk and investment goals. Conservative investors might lean towards selling or staying away due to financial concerns. Those confident in Jyoti CNC’s long-term prospects might buy or hold. Here, we would suggest you consider consulting a financial advisor for personalized advice.

By the way, what do you think about Jyoti CNC stocks? Feel free to share your thoughts in the comment section below! Thanks for reading 🙂

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Published By: Supti Nandi
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