Firm order book; margins in line… • Jindal Saw :: ICICI Securities

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Firm order book; margins in line…
• Jindal Saw reported a mixed set of Q3FY15 numbers wherein the
topline and EBITDA came in lower than our estimates while the
EBITDA margin and adjusted PAT came in line with our estimates.
Pipe sales volume for the quarter stood at ~2,15,600 tonnes,
lower than our expectation of ~2,40,000 tonnes
• Standalone revenues for Q3FY15 increased 11.7% QoQ and 4.0%
YoY to | 1777.4 crore and were lower than our estimate of
| 1895.2 crore
• The company reported an EBITDA of | 238.5 crore, up 13.9%
QoQ and 43.9% YoY (our estimate: | 254.9 crore). The EBITDA
margin came in line with our estimate at 13.4%
• The company reported an exceptional loss of | 40 crore on
account of foreign exchange loss. Subsequently, after adjusting
for exceptional item, adjusted PAT came in at | 101.9 crore, in line
with our estimate of | 103.4 crore
Order book remains firm…
On a sequential basis, the order book of Jindal Saw has remained firm.
Jindal Saw’s order book at the end of Q3FY15 stood at ~US$1 billion. The
break-up is as under:
ƒ Large diameter pipes – US$660 million
ƒ Ductile iron pipes – US$335 million
ƒ Seamless pipes – US$15 million
ƒ Pellets – US$15 million
Orders for large diameter pipes are slated to be executed by JuneSeptember
2015 while for ductile iron pipes, the same is slated to be
executed over the next 12-18 months. The company has participated in
various bids and is likely to get orders in phases. The current order book
includes export operations of ~35%. Major export 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 (~150,000 tonnes - valued at US$135 million) is in addition
to the above order book of US$335 million. The order book on a
consolidated basis stands at US$1.25 billion.
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 ~6,10,000 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.
Firm order book augurs well, higher debt continues to weigh!
Going forward, we have maintained our sales volume assumptions at 1.2
million tonne (MT) for FY16E and modelled sales volume of 1.3 MT for
FY17E. Even though a firm order book augurs well for the company, we
have a cautious view on the back of elevated debt levels, which are likely
to rise further on account of planned capex. We have valued the stock at
6x FY17E EV/EBITDA. Subsequently, we have arrived at a target price of
| 90 and assigned a HOLD recommendation to the stock.

LINK
http://content.icicidirect.com/mailimages/IDirect_JindalSaw_Q3FY15.pdf