Jindal Saw-Lower shipments in 2Q; better outlook:: UBS

Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Jindal Saw
Lower shipments in 2Q; better outlook
􀂄 PAT decline 30.2% y/y on lower shipments
Pipes sales at 135,000 tonnes eased 19.6% Y-o-Y (lower shipments) and
realisations declined 24.4% Y-o-Y to US$1,276/tonnes in 2QFY11. Revenues
eased 41.6% y/y to Rs 8.0 bn. Conversion cost was lower at US$ 294/tonnes (-
12.7% y/y). EBITDA margin was flattish at US$294/tonnes in 2Q. This coupled
with higher D&A resulted in PAT decline of 30.2% y/y to Rs 1.0 bn. Forex losses
booked were Rs. 190 mn.


􀂄 Order book improves to US$780 mn
At 2QFY11 end, order book improves to US$780 mn, from US$700 mn at end
1QFY11, indicating an order accretion of US$272 mn. This is equivalent to 625k
(thousand) tonnes, and is executable by June 2011.

􀂄 Management reiterates positive guidance from 3QFY11
Jindal Saw’s (JSL) management maintained sales guidance of 800-900 ktonnes,
and EBITDA margins to be broadly maintained. 1HFY11 sales were 342ktonnes,
indicating improved performance hereon. For Jindal ITF, management guides
EBITDA of US$12 mn in FY11. Demerger completion likely by July 2010.

􀂄 Valuation: Diversified business; maintain Buy and PT of Rs 285/share
We broadly maintain estimates and maintain our price target of Rs 285/share, using
UBS-VCAM tool and adding Rs 53/share value of group company investments.
We assume WACC of 12.3% and terminal growth of 2.0%. JSL is a diversified
company with catalysts like new DI expansion, potential iron mine (pending lease
agreement), and overall industry improvement. Key risks remain MTM losses of
US$132 mn, steel and currency volatility.