Sales volume surprises; margins disappoint… • Jindal Saw :: ICICI Securities, PDF link

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Sales volume surprises; margins disappoint…
• Jindal Saw reported a good set of Q2FY15 numbers wherein
topline, EBITDA and PAT came in higher than our estimates. Pipe
sales volume for the quarter stood at ~1,93,000 tonnes, higher
than our expectation of ~1,80,000 tonnes
• Standalone revenues for Q2FY15 increased 38.5% QoQ and
29.4% YoY to | 1591.4 crore (our estimate: | 1,327.6 crore)
• The EBITDA margin for the quarter came in at 13.2% lower than
our expectation of 14.9%.The company reported an EBITDA of
| 209.4 crore, up 29.4% QoQ and better than our estimate:
| 198.3 crore
• Standalone PAT increased 35.9% QoQ to | 74.6 crore (our
estimate: | 69.2 crore)
Sequential increase in order book augurs well
Over the last couple of quarters, there has been a notable improvement in
the order book, which augurs well for the company. Jindal Saw’s order
book has increased from ~US$560 million at the end of Q3FY14 to
~US$800 million at the end of Q4FY14 and further to ~US$1 billion at the
end of Q2FY15. The break-up is as under:
ƒ Large diameter pipes – US$655 million
ƒ Ductile iron pipes – US$339 million
ƒ Seamless pipes – US$15 million
Orders for large diameter pipes are slated to be executed by June 2015
while in case of ductile iron pipes the same is slated to be executed over
the next 12-18 months or more. The company has participated in various
bids and is likely to get orders in phases. The current order book includes
export operations of ~45%. Major exports orders are from the Middle
East, the Gulf region, South East Asia and the Far East. The order book of
ductile iron pipes is only for Indian facilities. The order book of UAE
facilities is in addition to the above order book of US$330 million.
Utilisation level of saw pipe segment, key monitorable, going forward
Over the last couple of years, the saw pipe segment has been operating
at muted capacity utilisation levels. However, with the improvement in the
economic scenario, the capacity utilisation level is likely to improve, going
forward. While the current order book of the large diameter pipe segment
(LSAW and HSAW) stands at ~5,50,000 tonnes, the pace of execution of
the order book is likely to be a key monitorable, going forward. The
management expects operations in this segment to get ramped up
gradually in line with the orders in hand.
Increase in order book augurs well, higher debt continues to weigh!
On the back of healthy sales volumes during the quarter, we have revised
upwards our sales volume assumptions. We have modelled pipe sales
volume of 1.1 million tonne (MT) for FY15E (from 1.0 MT earlier) and
maintained our FY16E sales volume at 1.2 MT. Even though the increase
in order book augurs well for the company, we have a cautious view on
the back of elevated debt levels, which is likely to rise further on account
of planned capex. We have valued the stock at 6x FY16E EV/EBITDA.
Subsequently, we have arrived at a target price of | 82 assigning a HOLD
recommendation to the stock.

LINK
http://content.icicidirect.com/mailimages/IDirect_JindalSaw_Q2FY15.pdf