Jindal SAW Ltd. - PINC Visit Note

We met the management of Jindal SAW to get an outlook on the pipes sector, their expansion plans and the status of their mines.

Key Takeaways:

• Growing Indian market to tide over excess supply: Large Dia pipes segment forms ~USD1.8bn market in India and ~USD19-20bn globally and growing. The demand for DI pipes segment is also growing at a rate of 25% p.a. This is expected to counter the excess supply situation in the short-run.
• Ongoing expansions: JSL plans to incur Rs 6.5bn in next 15 months for DI pipe expansion and iron ore beneficiation projects.
• Orders worth USD780mn booked at lower rates; EBITDA margins to decline: Management believes that EBITDA/tonne of Rs13,000 in FY10 is not sustainable and could contract to Rs11,000-12,000 in FY11.
• Captive iron ore mines to result in savings of ~Rs2.5bn pa: The company expects environmental clearance for iron ore mines in Rajasthan in 90 days time and subsequently to be operational by H2FY12. Captive iron ore, post beneficiation, is expected to save Rs3,000/tonne (~Rs2.5bn per annum).

Valuations

At CMP of Rs200, the stock is trading at a trailing P/E of 9.4x and trailing EV/EBITDA of 6.8x. Currently we have no rating on the stock.

Source : Equity Bulls

Keywords