IPO: JNK India

JNK India, a heating equipment manufacturer, is launching its IPO (initial public offering) on April 23, 2024. To help investors make an informed decision, below is a breakdown of the company's strengths, weaknesses and growth prospects. In a nutshell Quality: Its three-year average ROE and ROCE were 53 and 58 per cent respectively, between FY21 and FY23. Growth: Its revenue grew 72 per cent annually between FY21-23. Further, its PAT (profit after tax) compounded by 68 per cent annually during the same period. Valuation: The stock is valued at a P/E and P/B of 49.8 and 4.9 times, respectively. Overview: The growing demand for heating equipment in the oil and gas industry is expected to drive growth. However, the demand for renewable energy might affect the company's financials if it is unable to scale its offerings for the petrochemical and fertiliser industries. About JNK India JNK India is the Indian subsidiary of South Korea-based JNK Global. The company manufactures critical heating equipment such as process-fired heaters, reformers and cracking furnaces for use in the oil and gas, petrochemicals and fertilisers industries. Strengths of JNK India Support from promoter company: JNK Global holds a 16 per cent market share (including JNK India) globally and provides customers to JNK India. High entry barriers: JNK India enjoys a sizable market share in an industry with high entry barriers. New entrants find it difficult to scale up due to the stringent quality norms and high switching costs. Weaknesses of JNK India Working capital intensive: The company operates in an industry with high working capital requirements. As of FY23, it recorded 105 working capital days, with the average trade receivables accounting for 35 per cent of revenue between FY21 and FY23. High revenue concentration: As of the nine months ending December 2023, the company derived the majority of its revenue from the oil and gas industry. IPO details Total IPO size (Rs cr) 650 Offer for sale (Rs cr) 350 Fresh issue (Rs cr) 300 Price band (Rs) 395-415 Subscription dates April 23-25, 2024 Purpose of issue To meet working capital requirements Post-IPO M-cap (Rs cr) 2308 Net worth (Rs cr) 469 Promoter holding (%) 68 Price/earnings ratio (P/E) 49.8 Price/book ratio (P/B) 4.9 Financial history Key financials 2Y growth p.a. (%) 9M FY24 FY23 FY22 FY21 Revenue (Rs cr) 72 253 407 296 138 EBIT (Rs cr) 63.6 63