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    Jindal Saw Q3 FY25 earnings call

    JINDALSAWGood
    Capital Goods·28 Jan 2025
    Management Summary

    Jindal Saw reported a resilient Q3 FY25 characterized by plateauing top-line growth but significantly improved profitability margins due to a superior product mix. The company is transitioning into a new growth phase with major CAPEX projects like the coke oven battery and seamless pipe expansion nearing completion. Management is focused on deleveraging, with long-term debt now well below annual EBITDA levels.

    Highlights

    8

    • Revenue for Q3 FY25 stood at ₹4,521 crores, showing a slight decline from ₹4,790 crores in the trailing quarter.

    • EBITDA reached ₹882 crores with a strong margin of 19.5%, exceeding the trailing quarter's ₹875 crores.

    • 9-month PAT grew significantly by 29% YoY to ₹1,400 crores from ₹1,085 crores.

    • Long-term debt successfully reduced to below ₹930 crores against a net worth of nearly ₹10,000 crores.

    • Ductile Iron (DI) pipe volumes were approximately 1,75,000 tons for the quarter.

    • Stainless steel volumes are at 5,000 tons per quarter, with a target to reach 15,000 tons by year-end.

    • Order book is plateauing as the company reaches 70-75% capacity utilization, prompting new CAPEX cycles.

    • Export revenue mix improved to 22-28%, providing a natural hedge against FOREX fluctuations.

    Concerns

    1

    • Slowing Central Government Infrastructure Spend

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹4,521 Cr-5.5%YoY
    2. 02EBITDA₹882 Cr-0.8%YoY
    3. 03EBITDA Margin19.5%
    4. 04PAT₹623 Cr0%QoQ
    5. 05Long Term Debt₹930 Cr

    Segment breakdown

    • Ductile Iron (DI) Pipes1,75,000 tons72.9%
    • Seamless Pipes60,000 tons25.0%
    • Stainless Steel5,000 tons2.1%
    Donut· Share of Quarterly Volume

    Guidance & targets

    4
    CategoryTargetPriority
    Margin
    EBITDA Margin Band
    17.5% to 20%
    		High
    Volume
    Stainless Steel Quarterly Volume
    15,000
    		High
    Volume
    Seamless Pipe Quarterly Volume
    80,000-90,000
    		Medium
    Debt
    Long-term Debt Reduction
    Further reduction
    		High

    Risks & concerns

    5
    RiskSeverity

    Slowing Central Government Infrastructure Spend

    Management noted a lull in central schemes like Jal Jeevan Mission, though they expect a fillip in the upcoming budget. — Management acknowledged

    high

    Raw Material Price Volatility (Coking Coal)

    Management believes new captive coke oven battery and PCI injection will mitigate market price risks. — Both downplayed

    medium

    Revenue Plateauing

    Top line has plateaued around ₹4,500-5,000 crores per quarter as current capacity reaches 70-75% utilization. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Specific split of center vs state funded projects (deferred to email)
    • Exact quantum of revenue slippage from Q3 to Q4

    Q&A highlights

    3

    “At this point of time in the MENA region what we have on the drawing board... is how to address both, the oil and gas as well as water sector... over the next 6 months you would definitely see some announcements.”

    Investors are looking for the next growth trigger as domestic capacity utilization plateaus.

    asked by Shweta Dixit, Systematics

    2 min read5 chapters

    Detailed Narrative

    01

    Margin Resilience Amidst Revenue Plateau

    Jindal Saw's top line has plateaued between ₹4,500 and ₹5,000 crores per quarter, a trend management attributes to reaching 70-75% capacity utilization. Despite this, EBITDA margins improved to 19.5% in Q3 FY25, driven by a shift toward high-margin value-added products like seamless premium connections and double chamber DI pipes. Management expects to maintain EBITDA margins in the 17.5% to 20% band for the foreseeable future as the product mix continues to evolve.

    02

    Strategic Deleveraging and Capital Structure

    The company has achieved a significant milestone in financial health, bringing long-term debt below ₹930 crores against a net worth of nearly ₹10,000 crores. With annual EBITDA running at approximately ₹3,000 crores, the debt-to-EBITDA ratio is exceptionally low. Management intends to use existing liquidity to further reduce long-term debt before the end of the fiscal year on March 31, 2025.

    03

    Capacity Expansion and Volume Outlook

    To break the current revenue plateau, Jindal Saw is nearing the completion of several CAPEX projects. The seamless pipe unit is doubling its capacity, with commissioning expected in the next 3-5 months, targeting a volume increase from 60,000 to 90,000 tons per quarter. Additionally, stainless steel volumes are projected to triple from the current 5,000 tons to 15,000 tons by the end of FY25, eventually reaching 20,000-25,000 tons next year.

    04

    Domestic Infrastructure Dynamics

    Management highlighted a notable shift in the domestic market where central government spending on infrastructure has slowed down, particularly in schemes like the Jal Jeevan Mission. However, this is being offset by increased activity from state governments in Rajasthan and Madhya Pradesh. The company is closely watching the upcoming national budget for a potential 'fillip' to infrastructure momentum.

    05

    Global Expansion and MENA Strategy

    Jindal Saw is actively examining new investment opportunities in the MENA (Middle East and North Africa) region to propel the company into its next growth orbit. Management expects to make formal announcements regarding these international projects within the next six months. The export order book currently stands at 22%, with a focus on both oil & gas and water transportation segments in the region.

    This is an AI-generated summary of a publicly available earnings call transcript.