Jindal Saw (JSL) is the most diversified player in the Indian pipe segment, catering to oil and gas transportation and exploration, water transportation, and sewerage systems.
In addition, the company has received accreditations from various oil and gas majors in the US, Middle East, and South East Asia. JSL is increasing its capacity to 2.05mtpa from 1.25mtpa by CY08.
The expansion would be across all products i.e. SAW, seamless and DI pipes. We expect higher capacity utilization of its existing facilities and new capacity additions to lead to strong growth for pipe segments in CY09 and CY10.
The company has a strong order book of $1,090 million to be executed by February 2009. The order book break-up is; SAW pipes —$860 million, seamless pipes — $65 million and DI pipes — $165 million.
With new capacities expected to be operational at the start of CY09, we expect topline to rise 39% y-o-y. We recommend a BUY with a short-term target price of Rs640.