Jupiter Wagons Ltd (previously CEBBCO)

I worked on some hypothesis and exited my position @407 (entry price was around 200 just before Q1 results). My thought for exit was as below:

Company posted an excellent set of Q1 numbers. This along with Railway’s Mega theme, stock was continuously one way ride from 200 to 400+. QIP plans were in works and it was expected that soon company may announce the same post board approval.

1. Company’s last QIP was raised at around Rs 120 and it’s 52 week’s low is around Rs 70-80. Any incoming investor would expect for decent upside and hence at peak price Rs 400+ it was significantly higher than QIP raised 4 months back.
2. Nearest competitor Texmaco rail has market cap of Rs 4000 Cr (against JWL’s peak valuation of Rs 15000 Cr). Texrail has also announced the QIP of Rs 1000 Cr which would be ~20-25% stake dilution for incoming investor compared to 5% stake in JWL at peak price. So, from investor’s point of view, Rs 400+ may appear stretched price.
3. While JWL has many pluses compared to texrail including significantly better margins, diversified future revenue streams, good steps in terms of technology tie up for making brakes, wheels etc along with getting into last mile connectivity through commercial EV etc, however, texrail is also working on efficiency, tie ups with European companies, tie up with Hindalco and on top of it is part of Birla Group.

For any upcoming investor, there would be comparison between the two wherein they would weigh their options to make a deal. Basis inputs from last concall of JWL and all above factors I felt that post QIP announcement price may correct to pave the way for investor to come in at a price wherein it becomes attractive to them (JWL’s float is low i.e; around 8% due to which price movement is always expected to be sharp).

Basis my estimation, I worked out a price of ~Rs 275-280 and hence exited on subsequent day of QIP announcement. Exit was also as I got almost 100% returns (for my initial tranche’) in ~1.5 month.

Now, I think even to get this estimated price, stock has to come down to this level and then stay for sometime to meet the criterion of SEBI (QIP price can not be lower than average price of last 2 weeks). Even as on date, average price for 2 weeks is around Rs 350/- which to me looks high from investor’s point of view. I will closely monitor the price in upcoming week and decide re-entry.

I could be wrong for this hypothesis though this worked for me. Thanks.