Jupiter Wagons: Over 1500% returns in 3 years, this stock continues to soar for 4th straight year; should you buy?

In the midst of the ongoing bullish trend in the Indian market, small-cap stocks have emerged as champions, delivering multi-bagger returns. Among these dazzling stars, Jupiter Wagons stands out as a true outlier, as the stock is delivering multi-bagger returns consistently over the last three years.

In CY21, investors in Jupiter Wagons were rewarded with a stellar return of 116%. This exceptional performance continued into CY22, with the stock gaining an impressive 110% over the year, and in the current year so far, the stock has already soared 103%, extending its winning streak.

For context, even during the pandemic year (CY20), when most stocks were falling and setting new lows, the stock managed to finish the year with a 37.14% gain.

Overall, from its July 2020 low of ₹11.65, the stock has skyrocketed 1505% to trade at the current price of ₹187 apiece, while in the last five years, it has rewarded shareholders with a return of nearly 960%.

Jupiter Wagons Limited (JWL) is an integrated railway engineering company that primarily manufactures freight wagons for the Indian Railways. Over time, the company has diversified into the manufacturing of application-based load bodies on commercial vehicles, braking systems, and marine containers for domestic and international use.

In its latest research note, brokerage firm Sharekhan pointed out that the company will be a key contender for orders of 50,000–80,000 wagons from the Indian Railway.

The government has recognized the fact that the logistics cost in India is 13% of the GDP as compared to 8% in the rest of the world, making it difficult for Indian exports to compete globally.

Road transport is competitive up to 250 km. Any cargo movement above 250 km should be done through railways to remain cost-competitive.

Also, India’s core sector has seen decent growth in the past few years, which will require additional road and railway logistics capacity. So, this gives the wagon manufacturing sector 4-5 years of decent growth visibility, the brokerage stated.

To meet the increasing demand for wagons from the Indian Railways, Jupiter Wagons is ramping up its manufacturing capacity from 600 wagons per month in Q4FY23 to 700 wagons per month by Q4FY24, said the brokerage.

The company generates an average revenue of Rs. 39–40 lakh per wagon. With a robust order book of ₹5,818 crore, the brokerage highlights that this gives revenue visibility for the next 1.5 years.

Moreover, the company expects to gain market share in the braking system, which according to the brokerage is currently dominated by two players. Through its two joint ventures, the company aims to capture approximately 20% of the market share in the braking system, it said.

From its subsidiary Stone India, JWL expects to generate another ₹250 crore in FY25 in braking systems. It is also working on obtaining certification on freight wagon braking systems, which will allow the company to cater to the needs of Indian Railways’ freight division as well as the company’s own captive requirements, it added.

Jupiter Wagons boasts a robust balance sheet, with a low net debt balance of Rs. 120 crore and a decent debt/equity ratio of 0.36 as of March 31, 2023. The brokerage noted that the company can fund its capital expenditure requirements through internal accruals and Qualified Institutional Placements (QIP), reducing the need for increased debt.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.