Jindal Saw

JINDAL Saw, one of the leading pipe manufacturers in the country, saw the prices of its stock plunge by close to 5% during the initial hours of trade.

Last week, the company’s stock gained around 7%. At the current price of Rs 700, the stock is trading at a trailing price-earning multiple of close to 9. During last year’s market meltdown, the Jindal Saw stock was badly hammered and the stock price dropped during the early part of this year to a level that the price-earning multiple, or PE multiple slipped to below one. However, the stock has consistently gained thereafter, thanks to the market upswing. With a priceearning multiple of 9, the stock is reasonably valued compared to its peers. If one were to look at the historical chart, Jindal Saw’s price-earning ratio (PER) has almost always traded at a discount to that of other top two pipe manufacturers — Welspun Gujarat Stahl Rohren (WGSL) and PSL.

Currently, PSL and WGSL are trading at a price-earning multiple of around 11 and 16, respectively. Having said that, the prospects of the company look bright. Its capacity is expected to grow by close to 30% to around 2 million tonnes over the next 2-3 years. Its diversified product portfolio — SAW (sub-merged arc welded) pipes and DI (ductile iron) pipes — helps in mitigating the demand risk arising out of a particular industry. It has a modest order book of Rs 3,600 crore and this translates into 0.7 times of its annual net sales in FY 2008-09. Its operating margin at 14-15% is comparable to its industry peers. However, the company lacks raw material integration and is at a disadvantageous position compared to integrated players such as WGSL.

Sector View on Indian Steel Industry

KRChoksey Shares & Securities on TATA STEEL

The company’s EBITDA has increased by 43.68% Y-o-Y from Rs 2,733.4 cr to Rs 3,075.9 cr. While PAT has increased to 50.13% from Rs 1,488.4 cr to Rs 1787.8 cr. Other income has also increased by 152.72% which has led to increase in the profit margins. We recommend a buy on the stock despite the growth concerns purely on the basis of attractive valuations.

KRChoksey Shares & Securities on SAIL

SAIL’s net sales increased 34% Y-o-Y to Rs 12,238.59 crore in Q2FY09 as against Rs 916 3.49 crore during Q2Y08. EBITDAof the company registered a growth of 17% Y-o-Y to Rs 3,433.92 crore & PAT rose by 18% Y-o-Y to Rs 2,009.6 crore. The second half of FY09 is expected to present significant challenges in the metals sector, though the long term fundamentals of the company remains strong.

Geojit Financial Services on JSW STEEL

The company is among the largest Indian steel companies. It has now tied up with UK based Severfield Rowen to float an equal stake joint venture company for manufacturing construction steel. The net profit of the company has grown 44.72% from the June quarter to this September quarter. The P/E of the stock is 3.43 and the EPS (TTM) is at 70.89.

Geojit Financial Services on WELSPUN GUJARAT STAHL

Welspun Gujarat Stahl Rohren is the flagship company of Welspun Group. It is all set to be positioned as the world’s largest pipe company with an increase in capacity from 1 million ton pa to 1.75 million ton by March 2009. The debt-equity ratio at 1.21 shows that most of the assets are financed and it must set aside more money to pay the cost of borrowed money.

Emkay Global Financial Services on HEG

HEG will become number one manufacturer of graphite electrodes in India after its expansion from 60000 tpa to 80000 tpa by Q4FY09. We expect topline and PAT to have CAGR of 37% and 25% respectively for next two years. It is trading at 5.9x FY09E FDEPS of Rs21.2 and at 2.6x FY10E FDEPS of Rs48.8.

Emkay Global Financial Services on GODAWARI POWER AND ISPAT

Godawari Power’s iron ore pelletisation will commence in 2HFY10 while the iron ore mining will start from Q4FY09 which will translate into tremendous savings. PAT is expected to grow at CAGR of 47% GPIL trading at 1.6x FY09E FDEPS of Rs40.2 and at 0.8x FY10E FDEPS of Rs76.6, while on EV/EBITDA basis it is trading at 2.4x FY09E EV/EBITDA and at 1.2x FY10E EV/EBITDA.

Stock views on Opto Circuits, Gateway Distriparks, Welspun Gujarat Stahl Roh

IIFL on Opto Circuits - Target Rs 216

IIFL has maintained its buy rating on Opto Circuits with a price target of Rs 216 in its report.

"Opto Circuits continued its growth momentum in 4QFY09, with topline and EBITDA up 77% and 105% YoY, respectively. On a QoQ basis, topline growth of 1% was marginally below our projection, but a 425bps jump in margin led to EBITDA significantly surpassing our estimates at Rs 705 million (up 16% QoQ). We estimate FY09 organic topline and bottomline growth of about 40% and believe the company will maintain the momentum in FY10 as well. The added growth opportunities from Criticare will likely bolster organic growth. We continue to believe in the large global opportunity in medical devices. We raise our FY10 and FY11 earnings estimates by 1-3%, our target price to Rs 216, and maintain 'BUY' rating," says IIFL's report

SKP Securities on Gateway Distriparks - Target Rs 135

SKP Securities has recommended a buy rating on Gateway Distriparks with a target price of Rs 135 in its report.


"Gateway Distriparks Ltd (GDL), a leading provider of port related logistics support services in India, promoted by three business groups based in Singapore and a business group in India. GDL operates container freight station on a pan India basis with strategic locations at JNPT, Chennai, Vizag and Kochi and ICDs located at Garhi Harsaru and Ludhiana. This presence enables it to cater to the West coast traffic, demand from the Northern hinterlands as well as the east coast traffic. We believe that GDL Ltd is the strongest player in CFS business, led by its strong presence and continuing growth momentum. We expect GDL to post revenue at CAGR of 18% aided largely by higher growth coming from its rail business and new ICDs capacity addition. At current market price of Rs. 92.5/-, the stock is trading at a P/E of 10.2x of FY 11E earnings and EV/EBITDA of 5.5x of FY11E. We hereby initiate coverage on GDL Ltd. and recommend buy rating with a target price of Rs 135/- (46% upside) in 12 months," says SKP Securities' report.

ULJK Securities on Welspun Guj - Target Rs 295

ULJK Securities has maintained its buy rating on Welspun Gujarat Stahl Roh with a target of Rs 295 in its report.



“Welspun Gujarat Stahl Rohren Ltd (WGSRL) is one of the biggest SAW pipe companies in Asia and one of the top 3 companies in the world with regard to the completion of challenging and extremely critical projects. For the annual year ended FY2009A, WGSRL recorded 43.7% growth in Net Sales. Net Sales for the year stood at Rs 57,395.2 million. The net profit was down by 37.3% to Rs 2,135.1 million when compared with FY 2008A. The company plans to demerge Plate cum Coil mill into a 100% subsidiary. WGSRL will own 100% of this demerged entity. We retain Buy with a target price of Rs 295 per share. At this price, the stock will discount FY2010E earnings by 14 times," says ULJK Securities' research report.