Jyoti CNC Automation Set to Boost Production by 10,000 Units
Jyoti CNC Automation, a leading manufacturer of high-precision CNC machines, is set to expand its production capacity by 10,000 units to 16,000 units. This ₹450 crore project, funded by debt and internal accruals, is expected to boost the company's growth and profitability.
The expansion comes on the heels of a significant improvement in Jyoti CNC's EBITDA margin, which jumped to 27% in FY25 from a mere 8.3% in FY23. The company expects this margin to sustain in the 25-26% range over the next few years. This growth is driven by a strategic focus on manufacturing mid-high end CNC machines to fill the demand-supply gap in the domestic market.
Currently, over 50% of India's CNC machine consumption relies on imports due to the lack of indigenous mid-high end CNC machines. Jyoti CNC aims to increase its domestic market share to 60% by 2027 from the current 54%. The company's target sectors include electronics manufacturing services (EMS), aerospace, and defense, where it has a strong order backlog of ₹4,410 crore, providing revenue visibility for the next 18-24 months.
The company's expansion is supported by a positive outlook for India's CNC machine tools production, which is expected to grow at a high double-digit rate during FY23-27. While gross margins may moderate, operating leverage is expected to maintain the EBITDA margin.
Jyoti CNC Automation's expansion is a strategic move to capitalise on the growing demand for CNC machines in India. With a strong order backlog and a positive outlook for the industry, the company is well-positioned for growth. We initiate coverage on Jyoti CNC Automation with a 'Buy' rating and a target price of ₹1,090.
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