Not all the companies making pipes can be compared apple to apple. They may be catering to different industries, making different products, having different asset intensity or are simply better managed operationally or financially. So one needs to look closely.
APL Apollo despite being in a commodity industry has done a great job in differentiating their offerings through value added products and establishing a superior operating model beating inherent cyclicality of the industry. Look at all their metrics such as cash conversion cycles, asset turn over, return on equity or capital and you will see that they are vastly superior to their many peers including jindal saw. This resulted in massive rerating of the stock in early 2020s as the company came on the radar of institutional investors and PMS’s who bid up the stock prices, driving valuations to crazy levels. Stock hasn’t done much in last 3-4 years as earnings are now catching up with valuations.
Welspun Corp seems to be gaining some favor because of apparently having some of their manufacturing facilities in the US and there is some positive sentiment that under new administration, Indian companies having factories in the US will get some sort of benefits. This is the reason stock hasn’t corrected much in last 3-4 months. But there again, purely on the basis of price performance jindal saw has outperformed welspun corp in last 3-4 years.
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Got it thanks. Jindal Saw is already ~25% from ATH. What are your views from no onwards. It will consolidate or go down more 20-25%?
I think a lot for infra stocks will depend on Feb 1 budget. Higher allocation from government may trigger a fresh rally in some of these counters.
Hello Mohit, how do I get detailed shareholding of institutional investors like this?
Hello,
You can use this to keep track.
Results out. Flat to marginal decrease QoQ and YoY. Topline has reduced even though margins increased, due to negative inventory… this is a worrying trend. Even though they are generating good cash and PAT. There doesn’t seem to be growth left.
Experts please comment on the results and outlook wrt price
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With Trump swearing in, There could be a major infrastructure growth impetus in offing with Russia - Ukraine and Israel - middle East wars ending. There could be push to rebuild the completely damaged infrastructure in these regions. If Ukraine gets funding from EU and western world for rebuilding it itself could be huge huge demand.
America itself can embark on major infra revamp as the aging infrastructure is incapable of handling current demand. Water shutdowns while fighting LA wild fires shows that.
Demand can further get impetus in India with drinking water and Gas infrastructure development. Whatever has been done till now is just small tip of the iceberg.
Let’s see…
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They need to fUrther expand their presence in the market. Either by fresh capex or acquisitions. Otherwise topline will not grow anymore and they will at best give 500crs a quarter as PAT.
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I always feel embarrassed for saying “I told you so” but that’s exactly how it has played out so far.
Last quarter was flat and this quarter was mediocre.
When a stock has given 8-9x moves in just 2 years, new investors should always find reasons for mean regression instead of trying to figure out new triggers for another repeat of the same performance.
In normal circumstances, 8-9x performance in 2 years is highly abnormal for any stock which always indicates massive discounting of everything positive, exciting and promising that may happen in the future. And when that happens there is literally no room for disappointments.
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Right
But stock is behaving as if company posted losses… its bloody making ~500crs profit even when market was estimating lower margins due to commodity nature… It’ll be a cash flow generating machine going forward even if topline doesn’t grow at worst case. Keep falling so much, at what point does it become a BUY when its already attractive AT CMP of 230… trading at less than 5x EV/EBITDA and less than 8 forward PE…
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Market doesn’t reward earnings but earning growth and that too what will come in the future and not what has come about in the past.
In bull market with excessive liquidity investors take 8x move in 2 years for granted but it shouldn’t be the case. It just points towards massive discounting of all great things in future and unlimited amount of liquidity to support that discounting.
So when there is certain disappointment about future prospects of a company combined with liquidity squeeze, all that discounting will unravel and stocks will get hammered.
For cyclical stocks very low P/E and other valuation metrics should be seen in the context of earnings as they will look always low when earnings are ath.
Nothing wrong with Jindal Saw stock or company and it may probably not correct a lot from these levels. But expecting repeat of stellar returns in short term is unrealistic. We need to wait for both turnaround in business cycle and liquidity to come back in market.
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Unfortunately CAPEX allocation from government in this budget was below expectations so don’t see any risk-on sentiments in infra or capital goods stocks. From now on it’s just earnings that will have to do all the heavy lifting in these stocks.
More than allocation, spending is important.
Government did not spend even what they allocated in the budget for capex this fiscal. Today is the problem.
Water (Nal se Jal types ) scheme are executed together with state governments which are grossly inefficient, bureaucratic and lethargic. Execution is an issue.
I think water and sewage have high social and hence voting implications and hence will find renewed focus sooner than later.
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Did JITF lost the arbitration case against NTPC and won’t get the arbitration tribunal amount?
They have filed on BSE but I did not understand why they have to file an appeal against the order now.
Is this news factored in or bad for Jindal Saw since it has to support JITF again now?
Can anyone read the order passed and share their analysis.
Jindal Saw.pdf (1.9 MB)
Page 12 : Slower order booking due to delay in release of funds for related Infra projects
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@Mohit_baid followed the concall?
Company has taken up all the possible/potential hit. No negatives possible, irrespective of final ruling.
JV with hunting already profitable with 27 Cr profit within first year of op.
Company working on multiple proposals for expansion including one in Rajasthan.
Key thing to note is that company acknowledges the top line plateaued
And company expects next quarter numbers also to be in similar range.
Neeraj kumar sounded confident for future.
What does your assessment say? Also, if you have researched about it, what is the future of JITF? Has company got some plans for it?
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Hi Jugal,
I have been travelling, will get back to you soon.
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Stock has gone to shit. Absolutely terrible performance. 385 high to now 200. What a value destruction. Q1 will be weaker as well. Don’t think it woll cross its all time high until another 2-3 years or company takes massive capex.
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I was reading more on this.
- Looks like they are not expected win JITF NTPS case. May be thats what they have taken all the hit possible. (The points mentioned by Delhi and supreme court are fair points) I think the JITF is a finished business, unless pivot or money invested.
- Next quarter also going to be more or less same.
- At current scale and capacity, revenues will be in this range only. There is minor brownfield expansion going on in different segments. Can expect 10-20% boost in revenues on account of this. I dont have numbers to calculate this.
- Management is realizing that the revenues have maxed out and highlighting the same for last 2 3 con calls. However, in this one, they did mention about expansion plans on drawing broad including one in Rajasthan.
- The hunting JV has made a profit within 1st year of ops. With this JV, they are the first and only in india to manufacturer OCTG with premium connections locally. The JV can scale big and contribute meaningfully in terms of numbers.
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