With a diversified product profile of submerged arc welded (SAW), ductile iron (DI) and seamless pipes, and an order book of $900 million (0.75 times FY10 sales), Jindal SAW is well placed to benefit from the growing need for pipes from the oil and gas, and water transport sectors.
Iron ore assets in Rajasthan will add to DI pipe margins this year. Jindal SAW’s investments in group companies are 60% of its market cap; no wonder it’s demerging the investments as a separate entity.
Meanwhile, Jindal ITF, a subsidiary that has invested in the infrastructure business is likely to generate earnings from FY12.
Even after assuming a 50% discount to market price of its investments, Jindal SAW trades for under six times FY12 earnings. Find me a cheaper pipe company.
Our Recommendation :
After a recent spike to 210 it is now correcting. Wait for declines to 175 levels and buy. The stock has a potential to go to Rs.350 levels where one can exit.
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