Jyoti CNC Automation newly rated 'Buy' at Yes Sec; 18% upside seen

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Yes Securities has initiated coverage on Jyoti CNC Automation stock with a ‘Buy’ call. The brokerage has given a target of ₹1,090 per share, implying an 18 per cent upside from Friday’s close of ₹921.3 per share. Jyoti CNC is the third largest CNC machine supplier in India with a market share of 10 per cent, according to the brokerage note. 

 

The company specialises in the production of high-precision CNC lathes, vertical machining centers, horizontal machining centers, and custom automation solutions. It serves various end markets, including aerospace and defense, EMS, General Engineering, and Autos.

 

On Friday, Jyoti CNC’s share price closed 4.93 per cent higher at ₹921.3 per share. In comparison, BSE Sensex was up 0.28 per cent at 81,207.17. 

 

In the past one month, Jyoti CNC’s shares have gained 2.7 per cent, as compared to Sensex’s decline of 0.59 per cent. 

Why is Yes Securities bullish on Jyoti CNC?

Strong industrial tailwinds: A&D, EMS, semiconductors

India’s manufacturing ecosystem is benefiting from multiple drivers: indigenisation in aerospace and defence (A&D), rising EV adoption, higher value addition in mobile phone manufacturing, investments in semiconductor production/ATMP, and a pickup in component manufacturing. The electronics manufacturing services (EMS) industry alone may require about 100,000 machines over the next five years, as per industry reports. Internationally, the A&D opportunity remains strong in Europe with elevated defence spending and continued aircraft production growth.  ALSO READ | Marico eyes 30% Q2 revenue surge on price hikes; margin pressure temporary

Import substitution via high-end CNC machines

India’s machine tool output is expected to grow at low double digits (FY23–27), while CNC machining centres are seen growing at low-to-mid double digits. With more than 50 per cent of mid-to-high-end computer numerical control (CNC) consumption still import-dependent, Jyoti CNC are targeting this gap by producing higher-end machines locally, the brokerage believes. The domestic share of CNC machines is projected to rise to about 60 per cent by 2027 from 54 per cent in 2023.

Capacity expansion: 2.5x by June 2026

To meet rising demand from EMS and A&D, Jyoti CNC plans to expand annual capacity by 10,000 units to 16,000 units by June 2026 at a capex of ₹4.5 billion, funded through debt and internal accruals. This follows a 1,600-unit addition in September 2024, which lifted capacity to 6,000 units.  ALSO READ | Top 3 reasons why Emkay is upbeat on Vishal Mega Mart; initiates with 'Buy'

Strong backlog, resilient margins, FCF from FY27

The company’s order backlog stands at ₹4,410 crore, providing 18–24 months of revenue visibility. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margin improved sharply to about 27 per cent in FY25 (from 8.3 per cent in FY23) and is expected to sustain in the 25–26 per cent range during FY26–28, with gross margin moderation offset by operating leverage. Yes Securities anticipates revenue compound annual growth rate (CAGR) at 30 per cent over FY25–28, led by order execution and growth in EMS and A&D. 

 

The brokerage projects earnings per share (EPS) to grow at over 30 per cent CAGR in the same period. Free cash flow (FCF) generation is expected from FY27 post-completion of the ₹450 crore capex plan, with return on capital employed (ROCE) seen improving to around 25 per cent from FY26.