Pipes �� ::Q1FY12 Result Preview -ICICI Securities

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Pipes
�� Improvement in topline but higher costs impact EBITDA margins
We expect the topline of the I-direct coverage universe to increase
by 8.2% YoY to | 1659 crore, primarily on the back of improved
volumes. However, the EBITDA is expected to decline by ~16%
YoY and ~7.5% QoQ on the back of higher cost of raw material. As
a result, we expect the EBITDA margins to decline by 500 bps from
~23% to ~18% YoY.
�� Order book position deteriorates
Despite crude prices remaining at elevated levels, the overall
demand for pipes has been muted in Q1FY11. This is evident from
the order book position of pipes companies (I-direct coverage) at the
end of Q1FY11 we expect it to stands at ~|4348 as compared to
|5097 at the beginning of the quarter. This indicates there has been
order execution but not any significant order accretion.


Company specific view
Company Remarks
Jindal SAW In Q1FY12, overall volumes of the company are expected to improve ~6% YoY to
~2,18,000 tonnes while topline is expected to improve ~4%. However, due to
higher input cost of iron ore and coking coal, cost of production is expected to rise
leading to a sharp decline in margins by 600 bps YoY and ~74 bps QoQ
Maharashtra
Seamless
We expect volumes to grow by 10% YoY to ~84375 MT due to higher demand for
seamless and ERW pipes. EBITDA margin is expected to remain stable at ~25%,
(blended EBITDA/tonne of ~| 14500/tonne). Net profit margin is expected to
decline to ~16% from ~24% in Q1FY11 due to lower other income as compared to
Q1FY11
Source: Company , ICICIdirect.com Research