Anyone still tracking Jindal Saw? It recently fell a lot after a superb Q2 earnings. Can’t fathom the reason behind getting hammered. Are we missing something that market knows. @Mohit_baid
Hi, I think there are 2 major reasons for the selling spree -
- Market correction, almost all stocks are down 10-30% from their high.
- Muted guidance for the next 2 quarters, Q2 saw a drop in growth rate.
Although I have reduced weightage for the next couple of quarters, valuations look very reasonable and show very little signs of further correction convincing me to stay put.
Thanks @Mohit_baid . I also see that Mutual Funds holding Jindal Saw, the qty has almost doubled in October Month.
Valuation does look very good, and they have also reduced their long term debt. The problem is I bought at the earnings day top, and it has been a downhill since. This is a major holding of my portfolio so feeling sharp pain.
Do you see Jindal Saw earnings being topped out and no further volume growth expected in short term? Concall they mentioned focus will be on margin than volume growth.
Also any update on the NTPC Case? Will Jindal Saw get 2k crs if they win the case?
I also exited due to next 2 quarters at least will be flat in earning as per conference call. Again since I buy, it always look cheap on P/E basis, Only gain come from earning, there was no P/E rerating, even reduced little.
But they have guided a spurt after 2 quarters, then shouldn’t market price this is instead of discounting. And company will churn 450-500 Crs PAT and generate good cash flow. At CMP, its a no brainer, especially when you compare the overvalued stuff in market. They’re also going to enter the US market with premium value add products. Downside risk looks very low while having a very high probability of atleast doubling from CMP in near future. (PE should rise to 18-20)
Now if only they make a judgement against NTPC… Its taking too long.
I’m curious to understand what caused you to reduce weightage despite strong conviction shown by you in the stock.
I generally tend to switch to opportunities where both my and the promoter’s convictions are strong. In this case, Jindal saw may not see any drastic improvements in growth rate at least for the next 6 months or until Government tenders start rolling out at full pace. So Found it wise to reduce weightage and switch to an opportunity where my capital is better utilized at least for the next 6 months. Long term story however remains intact.
Promoters are showing conviction though. If you ignore the next 1-2 qtr, they have guided for volume and margin growth, which is already good. Debt reduction is in play, tactical capex as well which will unlock volumes. Further, promoter holding, FIIs and DIIs have all increased the stake, public has decreased. Its a matter of time before we a rerating as well. Management has also said they want 15-20% of their revenue from high value add products and not commoditized business and approvals are awaited, could take 1-1.5 years for them to hit it big.
Makes no sense for such a huge cash flow generating machine to trade at such discount, even lower than the intrinsic value. With the 2k crs from NTPC case, and the 1k crs from rights issue resolution, they have 3k crs for potential capex/expansion/acquisition plays, with very little long term debt. All in all, this is a massive ignored underdog being supported by all tailwinds. Budget in Feb will further focus more on water and oil/gas infra (as seen from exploration news)
I never disagreed 
Just add few Points on the basis on concall
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Going forward, we expect this trend to continue. We are hoping that the steel prices will stabilize and if that happens, then we may see that we may go back to the original close to 19% EBITDA margin.
How to improve EBITDA,
- new product that is being developed,
- the new industry segment that we are trying to enter
- Export domestic mix is above 20%, 25%. And we are happy if it goes up to 35% to 40%.
Add-on statement to be look in the future
The business environment is good, both in the export segment as well as in the domestic segment. Demand is good, stable because of the continuity of the government, the projects are continuing, even though we are seeing a little plateauing in the Jal Jeevan Mission.The state-level projects which are also being funded by the multinational agencies, that is on an increase. So that more or less compensates the water segment, where the Jal Jeevan Mission is
seeing a little plateauing. The state-level projects are seeing an upward trend. Most of the states are now catching up on this water infra focus.
Oil and gas continues to be robust. India’s focus on oil and gas is improving. Now the East Coast is also catching up. Earlier, it was more in an exploratory stage. Now they have reached a stage where they would start getting into the production stage. That has given rise to deep-sea drilling and deep-sea development of wells, which is good news for our higher-grade pipes and tubes also premium connections. Because typically, the deep-sea drilling, the deep-sea well development needs premium connection, coupled with higher grade of pipes and tubes. So, oil and gas is good.
Pellet, we continue to be stable. We continue to run at a very high capacity. And that trend is continuing. Industrial sector is showing a robust growth where now with our seamless and stainless, we are addressing that, and we are entering new segments. We are also focused on defense, nuclear atomic and other segments, which typically tend to be of higher margin.
The enter the U.S. market with our new products in the seamless and
stainless. That would be an area of growth in the export market, which in tonnage may appear to be modest, but in margins, it is likely to be high-margin business.
Interesting part to be look by the Investors:
At present, do we have any large fund requirements?
The answer is, we haven’t announced any new project as yet. But we definitely have a few things on the drawing board. We are examining those possibilities very closely because as with the current capacity, with the current performance, we have got a nice platform. Definitely, we would like to build on that.
Focus on the main business: in the last quarter, monetized our rail business, which is helping us focus our management bandwidth and the groupwide resources because this rail wagon which we were incubating for some time, we have monetized it. It was a 100% equity deal in one stroke. And that has given the group some resources to redeploy and also has given an opportunity for the management to focus on its core businesses.
Any idea what’s happening behind the scenes for Jindal Saw? Its been sliding continuously, below all 200 MAs now. Very weak, volumes are only there in selling, has been underperforming gor a whole quarter now. Is there something that we don’t know? Will need to decide after quarterly result because this has been a disappointment so far even after very good results. For some reason, market is not giving any value whatsoever to this counter.
This was my post 1 year ago. No stock will keep going up for ever and one should always be careful at a point when peak margin and peak p/e converge because it’s mostly either downhole or flat performance from there onwards.
Jindal Saw has been one of the best small caps in last 2 years giving an impressive 6-8x return which was mainly due to an exception run of financial performance over 5-6 consecutive quarters. Which means that market has already priced in a lot of positives that have either played out or yet to play out.
Now it’s very normal that stock will take a breather or even correct 20-30% from the top. Story may be still intact but as I said 1 year ago, risk reward doesn’t look very good. So one should temper their expectations as I don’t think we’ll see a repeat of stock performance seen in the last two years.
Do you think it will recover to its previous high by the end of this FY, provided Q3 results continues improvement marginally?
To be honest I don’t have the ability to predict stock prices as they are what market decides and for its own reasons.
But I don’t see anything wrong with company, its management or its business. So if results and guidance continue to be decent, stock should also give decent return to its investors. My only assertion has been that one shouldn’t expect the same return as in the past, as market being a fast discounting machine has priced in all the positives (current and future) in the counter which has gone up 8x in no time.
I’m struggling to understand why other peers are being valued at a higher P/E ratio, and yet there seems to be not much correction. What advantages or strengths do these companies have over Jindal Saw that justify this difference?
Which peers are you referring to?
I am consindering APL Apollo Tubes, Welpsun corp