Jindal Saw Limited (JSL) had reported Q4CY08 and CY08 results in line with our expectations. The results are not comparable on a yearly basis as the corresponding prior period numbers were inclusive of the erstwhile divested USA operations.
Blended EBDITA margins of ~Rs 8,750 / tonne were maintained for the year. The company had to incur mark-to-market (MTM) losses of ~ $109 million, even though it has not been recognized in the books.
The operational results of the new businesses (known as Jindal ITF) are not encouraging either and they continue to be a drag on the overall profitability of the company.
Going forward, the ongoing global slowdown is expected to adversely impact JSL’s growth and the company would find it difficult to maintain the same blended EBDITA per tonne.
The final settlement of the MTM losses and its full impact on the net worth of the company would continue to be an area of concern.
The order intake has also dipped and the company would be carrying an outstanding order book of just over $840 million, as compared to the over $1 billion order book that it used to enjoy during the last 4-5 quarters.
At Rs179, JSL trades at 3.5x CY09E and 2.8x CY10E fully diluted earnings. We change our recommendation to MARKET PERFORM with a revised target price of Rs225.
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