Jindal SAW Limited Sector: Iron & Steel Products

Transcription

1 Q4 & FY18 - Results Update Jindal SAW Limited Sector: Iron & Steel Products 28th May 2018 CMP (INR) (As on 25th May 2018) Target (INR) 210 Upside(%) 95% Recommendation Strong Buy BSE Code NSE Code Reuters Ticker Bloomberg Ticker Stock Scan Shareholding Pattern (%) JINDALSAW JIND.BO JSAW IN Market cap (INR Cr.) 3319 Outstanding Shares (Cr.) 6.69 Face Value (INR) 2.00 Dividend Yield(%) 0.92 TTM P/E (x) 9.18 Industry P/E (x) 7.20 Debt/Equity 1.09 Beta vs. Sensex Week High/ Low (INR) /72.45 Avg. Daily Vol. (NSE)/1 yr Mar-2018 Dec-2017 Sep-2017 Promoters Institutions Non-institutions Stock vs. Nifty (Relative Returns) - May-17 Aug-17 Nov-17 Feb-18 Jindal SAW Research Analyst Anmol Das anmol.das@smifs.co.in Nifty Source: NSE Company Overview Jindal Saw Ltd is engaged in the business of manufacturing SAW pipes (submerged arc welded pipes), spiral pipes for energy transportation sector, carbon alloy and seamless pipes for industrial effluents, and Ductile Iron pipes for water supply and sewage/waste/water transportation. The Company supplies to a number of customers spreading all over the globe, specially from the Oil & Gas sector clients from MENA, North America and Scandinavian region. The Company has its plants located in multiple locations: Kosi Kalan, Mathura, Sinar, Mundra, Bellary and Bhilwara, benefiting from the supply chain logistics. The Mundra plant location helps catering export orders from Gulf region and others. The Company s business is well balanced with 32% of its orderbook at the end of 31 Dec 2017 for exports while the domestic demands from Water sector are pushing their order book on the back of Government pushed Infrastructure and Housing projects. Key Highlights The Company reported Q4 standalone sales of INR2449 Cr, EBITDA of INR396 Cr and PAT of INR165 Cr. The consolidated annual sales stood at INR8536 Cr and EBITDA at INR1016 Cr surpassing our estimates by 3.8% and 18% respectively. However, the Company reported a loss of INR11 Cr on consolidated basis dragged down by an exceptional loss of INR91 Cr, selling off loss making subsidiaries and Jindal ITF Limited (water segment business) which is to be shut down and books closed with one time loss. The standalone net debt stood at INR4412 Cr down from Dec 17 position of INR4772 Cr. This includes working capital facilities of INR2369 Cr. Exhibit 1: Financial Performance at a glance (Consolidated) (key highlights cont d) Particulars (INR Cr) FY16 FY17 FY18 FY19E FY20E Net Sales 7,971 7,368 8,536 10,451 11,579 Growth % -7.7% -7.6% 15.9% 22.4% 10.8% EBITDA ,016 1,231 1,519 EBITDA Margin (%) 9.7% 10.3% 11.9% 11.8% 13.1% Adj. Net Profit (80) 39 (11) Net Profit Margin (%) (1.01) 0.52 (0.13) EPS (1.32) BVPS P / E (x) P / BV (x) EV / EBITDA (x) ROE (%) -1.6% 0.7% -0.2% 9.9% 13.5% ROCE (%) 4.6% 5.3% 6.3% 11.0% 13.3% Source: Company Data, SMIFS Research, Bloomberg Estimates 1

2 Jindal SAW Limited Exhibit 2: Financial Performance (Q4 & FY18) Particulars Q4 FY18 (Standalone) FY18 (Consolidated) Q4 FY18 Q4 FY17 YoY (%) Q3 FY18 QoQ (%) FY18 FY17 YoY (%) Net Income from Operations 2, , % 2, % 8, , % Cost of Materials consumed 1, % 1, % 5, , % Purchase of Stock-in-trade - - NA - NA NA Change in Inventories % (109.5) % (257.9) (6.9) % Excise Duty NA - NA % Employees Benefits Expense % % % Other Expenses % % 1, , % EBITDA % % 1, % EBITDA Margin (%) bps bps bps Finance Costs % % % Depreciation % % % Other Income % % % Exceptional Gain/(Loss) NA - NA (96.2) 87.3 NA PBT % % % Tax Expenses % % % PAT/(Loss) % % (11.0) % PAT Margin (%) bps bps (0.13) bps Key Highlights cont d The Board of Directors have recommended a dividend of INR1.20 per equity share of face value INR2.00. The Company executed orders of million MT (pipes, pig iron and job work done) during FY18, up by 13% from FY17's 1.04 million MT. The Pellet business grew significantly producing million MT of pellets during FY18. Orderbook Position: The Company has an orderbook of USD922 million as of 31 March 2018 as against orderbook of USD1.085 million at 31 Dec It includes SAW and DI pipes orders of value USD570 and USD300 million, which have a higher lead time and greater margin. The current orderbook includes 32% of export order from Middle East, South East Asia and Far East Asia. FY18 standalone financials: The Net standalone sales stood at INR7335 Cr, EBITDA at INR1030 Cr and PAT at 386 Cr. Variance JINDAL SAW LTD Q4 FY18 (Standalone) (INR Cr.) Mar'18 Mar'17 Dec'17 Bloomberg Estimates Our Estimate Variance % Revenue % EBITDA % PAT % Source: Company Data & SMIFS Research 2

3 Jindal SAW Limited Concall Highlights: The Management stated that all the loss making subsidiaries have been sold off during the year and they are focusing entirely on the core business productivity. The remaining subsidiaries which are in operation and contributing positively, includes: 1. Italian subsidiary 2. DI Pipes Abu Dhabi plant of 300,000 MT in which they have 37.5% stake 3. US Coating business 4. Jindal Quality tubular Stainless business of 20,000 MT And, the Jindal ITF water business has been discontinued and ships have been sold for INR250 Cr. The Company is going through few arbitration claims with GAIL and other earlier clients and the Management shown confidence of getting the arbitration in their favour. The arbitration amounts varied with business and we consider them contingent events but not losses The Company Management did not provided any Capex guidance for the future while reiterating that their focus is on ramping up the standalone/core business as well as maximising business of subsidiary units. Outlook and Valuation We expect both the Oil & Gas and Water sector to continue pushing the order book for the company in the near term. The Oil & Gas sector is expected to see many more upcoming projects in the prime region of interest (Middle East and Far East) for Jindal Saw while the Oil & Gas transportation domestically looks very bright with investments to be made by domestic players. These expectations are on the back of Oil Prices sustaining at the present levels (Brent Crude Prices to sustain above USD per barrel). On the other hand, the domestic water sector is expected to boom with increased activity in housing and residential projects as well as infrastructure push from the Government. Considering the robust performance reported by the standalone business of Jindal Saw for Q4 & FY18 which is pretty much in line with our estimates, we expect the company to remain focused with their core business operations. Also, since there is lot of space for improvement in capacity utilization for the company and no near future capex plans, the Company still has room for more debottlenecking and ramping-up the productions thereby reducing the lead time. Hence, we maintain our revised rating of Strong Buy for the Company with a Target Price of INR210 (earlier INR160) with a P/B (x) multiple of 1.05 for FY20. Please find below the link of our earlier report: Date: 7 Dec 2017 CMP: 114 Target Price: pdf Date: 30 Jan 2018 CMP: 154 Target Price: Target%20Price%20and%20Concall%20Highlights.pdf Source: Company Data & SMIFS Research 3

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