Jindal Saw reported a subdued set of Q1FY17 numbers wherein topline and PAT came in lower than our estimates. The muted performance during the quarter was on account of lower-thanexpected sales volumes. Pipes sales volume came in at 217400 tonnes (down 16.6% YoY, 34.2% QoQ), lower than our estimate of 303000 tonnes • Total income from operations was at | 1329.0 crore. After adjusting for excise duty, net operating income was at | 1281.3 crore (down 33.7% YoY, 29.4% QoQ), lower than our estimate of | 1848.5 crore • EBITDA came in at | 247.3 crore (down 13.0% YoY and 21.9% QoQ), broadly in line with our estimate of | 245.7 crore. EBITDA margins were at 19.3%, higher than our estimate of 13.3%.
Valuation: Jindal Saw has reported a subdued performance over the last few years. As a result, the stock price has almost halved in the last five years. Furthermore, the return ratios (RoE and RoCE) have also remained subdued on account of muted performance. On account of the oversupply situation globally in pipes (especially large diameter pipes), we do not expect a notable turnaround in the company’s operations in the medium term. Hence, they are suspending rating on the stock.