SP Tulsyan Tips - koolfriend4u
By SP Tulsian
Jindal Saw (formerly Saw Pipes) manufactures and markets submerged arc welded (SAW) pipes. Its product range includes large diameter submerged arc welded pipes and spiral pipes and bends which are used in the energy sector for transportation of oil and gas, carbon, alloy.
Its plants are located at Maharashtra, Uttar Pradesh and Gujarat, with an installed capacity of 14 lakhs TPA of iron and steel pipes, 10 million sq. meters of anti corrosion coating on pipes and 2 lakh TPA of Pig Iron.
For the six-month period ended June '09, it reported a net profit of Rs 233.84 crore, up 50 per cent as compared to Rs 155.60 crore of the same period last financial year.
On a quarterly basis, for Q2 ended 30th June 2009, net revenue rose 47% at Rs.1,500.22 crore. EBITDA up by 48% at Rs. 238.12 crore. PBT was higher by a whopping 93% at Rs.180.31 crore. Net profit was up 90% at Rs.133.71 crore.
In June 09’, the company secured fresh orders aggregating around Rs.1000 crore for supply of large diameter pipes and ductile iron pipes for domestic and export markets. Domestic orders were from GAIL India and HPCL while export orders were from Middle East market. The orders are to be executed by March 2010.
The proposed national gas grid project mentioned in the Union Budget 2009 is likely to have a positive impact on the country's pipe sector.
Also the higher allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will step up the demand of its products in the country.
The demand for pipes is huge in India due to rising demand for gas, new oil and gas discoveries and also due to growing demand for water transport infrastructure.
With oil prices expected to rise and also expectation of increase in oil demand, the seamless business is also likely to improve further in couple of months. All those expansions which had been postponed are expected to take off, especially by Q4.
Promoters hold 36.62% of the equity, institutional holding is at 31.98% and Bodies Corporate hold another 16.39%, leaving a very minuscule 7.87% amongst the small retail investors.
On an equity capital of Rs.52.12 crore, given the face value of Rs.10/share, the EPS for Q2 stands at Rs.25.65.
Even on a conservative basis, the company is expected to end 2010, with a net profit of Rs.400 crore and that gives us an EPS of Rs.77 for the year. This discounts the current price of Rs.498 by around 6 times and that’s a bargain given the size of the company and its business potential.
At the current price, the stock is a prime pick to ride the boom when it comes calling and one can expect a price of around Rs.750-800 in the next 8-10 months.
