Expanding Into Electric Mobility With Electric Mobility And Log9 Will Open New Markets In The Future

Key Takeaways

• Acquisitions and strategic expansions in electric mobility and infrastructure investments could significantly boost revenue growth and market positioning.
  
• Strong order book and product diversification in railway and electric mobility enhance future revenue visibility and earnings potential.
  
• Heavy investment in new areas and reliance on private orders and future railway tenders create uncertainty, potentially affecting revenue, profits, and shareholder value.

Catalysts

Manufactures and sells railway wagons, wagon components, and railway transportation equipment in India and internationally.

• The acquisition and successful commercialization of the Jupiter Tatravagonka Railwheel Factory, with expectations to double its revenue next year, highlights significant potential impact on revenue growth and stronger market positioning.
  
• The company's solid order book of ₹6,320 crores provides strong revenue visibility, ensuring sustained growth in the upcoming quarters, impacting future revenue positively.
  
• Strategic expansions in electric mobility, including increased stake in Jupiter Electric Mobility and acquisition of Log9 technology for railway and electric truck batteries, signal advancements in innovation and potentially enhanced earnings due to diversification.
  
• Infrastructure investments in the Indian Railways with anticipated government capital expenditure are expected to spur demand for products like railway locomotives and modern train equipment, potentially boosting revenues and net margins.
  
• Launching new product variants on the TEZ platform, alongside significant financial partnerships for electric vehicles, indicates future earnings growth driven by expanded market offerings and operational efficiency.

Jupiter Wagons Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Jupiter Wagons's revenue will grow by 25.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.4% today to 10.1% in 3 years time.
• Analysts expect earnings to reach ₹7.7 billion (and earnings per share of ₹16.24) by about January 2028, up from ₹3.7 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 54.5x on those 2028 earnings, up from 41.0x today. This future PE is greater than the current PE for the IN Machinery industry at 35.1x.
• Analysts expect the number of shares outstanding to grow by 3.74% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.73%, as per the Simply Wall St company report.

Jupiter Wagons Future Earnings Per Share Growth

Risks

• The company's significant reliance on private orders for stability may lead to fluctuations in order volumes, affecting revenue predictability and margins.
  
• The strategy of investing heavily in new areas like electric mobility could increase financial pressure without immediate returns, impacting earnings and profit margins in the near term.
  
• Delays and execution risks in emerging segments, such as electric vehicles and battery solutions, could hinder anticipated growth, affecting revenue and profit targets.
  
• The potential reliance on substantial future railway tenders introduces uncertainty and could impact the order book if such tenders are delayed or smaller than expected, affecting revenue visibility and growth.
  
• The company’s current equity enabling resolution for potential future growth could indicate over-reliance on equity funding, which may dilute earnings per share if exercised, potentially impacting shareholder value.

Valuation

• The analysts have a consensus price target of ₹587.0 for Jupiter Wagons based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹667.0, and the most bearish reporting a price target of just ₹507.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹76.3 billion, earnings will come to ₹7.7 billion, and it would be trading on a PE ratio of 54.5x, assuming you use a discount rate of 14.7%.
  
• Given the current share price of ₹355.8, the analyst's price target of ₹587.0 is 39.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.