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Pipes
ƒ Order book visibility remains an area of concern.
Despite crude prices remaining at elevated levels, overall demand has
been muted for pipe companies. The order backlog of major pipe
companies continued to lag behind on account of lack of additions in
the past few quarters from the oil & gas industry. As a result, the order
book of major companies within the sector has remained at subdued
levels. The outperformer within the sector has been Maharashtra
Seamless whose order book has increased by 35% QoQ to | 708 crore
at the end of Q1FY12 (| 523 crore at the end of Q4FY11).
ƒ Flattish performance on a QoQ basis
Within the pipe sector, we expect the topline of companies in the Idirect coverage universe to increase by 0.4% QoQ to | 1618 crore. The
EBITDA margin is expected to increase marginally from 17.4% in
Q1FY12 to 17.8% in Q2FY12E. As a result, the subsequent EBITDA is
expected to increase ~2.9% QoQ and ~0.7% YoY. The ensuing PAT is
expected to decline 1.2% QoQ and 15.3% YoY
: Company specific view
Company Remarks
Jindal SAW In Q2FY12, overall volumes are expected to remain flat at ~1,80,000 tonnes while
topline is expected to decline ~1.6% QoQ. However, due to higher operating costs,
the cost of production is expected to rise leading to a sharp decline in margins by 780
bps YoY and ~40 bps QoQ to 15.3%
Maharashtra
Seamless
We expect volumes to grow 6% QoQ to ~91250 tonnes due to a healthy demand
scenario. Seamless pipes volumes are expected to be ~61250 tonnes while that of
ERW is expected to be ~30000 tonnes. EBITDA margin is expected to increase by
210 bps QoQ to 23.4%, (blended EBITDA/tonne is expected at ~| 13000/tonne)
Source: Company, ICICIdirect.com Research
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