Jindal Saw: PAT growth of 71% & revenue growth of 12% in Q1-25 at a PE of 11
A free cash flow yield of 8%+ makes JINDALSAW attractive in terms of valuations. Order book provides revenue visibility into FY25 to deliver 10-15% volume growth with bottom-line growth faster
1. Manufacturer of Iron & steel pipe products, pipe-accessories and pellets
jindalsaw.com | NSE : JINDALSAW
Pipes and tubes: like Welded Pipes Above 16" Diameter, Rust-free Iron Pipes, Non-welded pipes for industrial purposes, Welded and Non-welded Pipes of different Stainless-Steel grades
Anti-corrosion and protective coating facilities along with the necessary ancillaries like fittings, bends, flanges etc. to make it a total pipe solution provider.
The company also produces and sells Pellets.
Substantial contribution to revenue is coming from drinking water supply and sanitation (WSS) which is growing rapidly in India and globally. The company’s exposure to the Oil & Gas sector accounts for only one fourth of the total revenue.
2. FY20-24: PAT CAGR of 36% and Revenue CAGR of 16%
3. FY23: PAT up 20% and Revenue up 34% YoY
4. Strong FY24: PAT 253% & Revenue up 17% YoY
5. Q1-25: PAT 71% & Revenue up 12% YoY
6. Business metrics: Improving return ratios
7. Outlook: 10-15% revenue growth in FY24
i. FY25: 10-15% volume growth
Management is confident of meeting FY25 guidance of 10-15 volume growth
Highest-Ever Sales Recorded In Q1; Domestic Demand Remains Strong:
ii. Margin improvement: EBITDA Margin from 15% to 16-17% in FY25
Q1-25 EBITDA Margin of 19% is higher than the 17.7% margin for FY25. Margin improvement on a top-line growth of 10-15% could drive bottom-line growth closer to 20%
stable raw material prices and value-added product mix have contributed towards margin improvement across all products.
iii. Strong revenue visibility: Order-book to be executed in 3-4 quarters
The current order book of the Company (for Iron & Steel pipes and pellets) is ~US$ 1.65 billion (Previous quarter ~ US$ 1.53 billion) the break-up is as under:
Iron & Steel Pipes: US$ 1,632 million
Pellet: US$ 15 million
FY25: We are booked for most of the year
The order book gives a visibility of appx. 3-4 quarters.
iv. Strong free cash generation: CAPEX not required for growth in FY25
Absence of capex reflecting in the strong free cash flow of Rs 1,700 cr+ generated in FY24.
We are carrying out modernization, but there is no major projects that has been announced on the horizon. So we expect the capex -- so, if you see the way the cash flows, there would be a lot of free cash flow is what we are expecting to come out of the would be largely used to pay for capex, pay for loan, use it for shareholder distribution.
8. PAT growth of 71% & Revenue growth of 12% in Q1-25 at a PE of 11
9. So Wait and Watch
If I hold the stock then one may continue holding on to JINDALSAW.
Coverage of JINDALSAW was initiated after Q1-24 results. The investment thesis has not changed after a strong FY24. A strong Q1-25 has increased the confidence in the management to deliver a stronger FY25 as per the guidance
The management expects the momentum to carry on for another 12-15 months.
The present pace of execution affords visibility of performance for the coming 12-15 months with further order enquiries building up indicative of sustained momentum.
The growth outlook, EBIDTA margin expansion, order book visibility and industry tailwinds give reasons to stay in the stock.
The order book gives a visibility of appx. three quarters even though few orders may be executed in the next 9-12 months period.
The Company expect the business environment to remain positive in the upcoming quarters despite the volatile geopolitical situation in the MENA and GCC region.
11. Or, join the ride
If I am looking to enter JINDALSAW then
JINDALSAW has delivered PAT growth of 71% & Revenue growth of 12% in Q1-25 at a PE of 11 which makes valuations quite attractive.
Outlook for 10-15% volume growth with EBIDTA margin of 16-17% would deliver bottom line growth closer to 20% in FY25 which at a PE of 11 makes valuations look reasonable.
JINDALSAW generated free cash flow of Rs 1,729.92 cr in FY24 on a current market cap Rs 20,614 cr, implies that its available at a free cash flow yield of 8.4% which makes the valuations quite attractive.
JINDALSAW at a market cap of about Rs 20,614 cr against FY24 sales of Rs 20,000 cr+ means that it is available at a market cap to sales of around 1
Previous coverage on JINDALSAW
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