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Jindal Saw Ltd

| Q3 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤23rd Jan 26

Summary : Jindal Saw reported sequential Q3 FY26 improvement driven by higher volumes and new project commencements, while navigating domestic payment delays and expanding its global footprint with new MENA facilities and increased export focus.

Management Perspective positive : Management expressed a 'positive outlook on government initiatives,' believes 'Q2 marked the bottom of the cycle,' and is 'hopeful' for budget support and improved conditions. They are 'taking decisive strategic actions' and see 'green shoots' emerging.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 performance improved sequentially due to higher volumes and productivity.
  2. Total pipe order book reached 19.64 lakh metric tons by December '25, up from 19.25 lakh tons.
  3. Production commenced for the 6,22,000 metric tons HSAW pipe export contract for Saudi Arabia.
  4. New seamless plant piercing mill started production, increasing capacity by 4 lakh tons per annum.
  5. Consolidated total income was INR4,963 crores, with EBITDA at INR632 crores and PAT at INR248 crores.

Future Growth Prospects

  1. Expanding Middle East footprint with a new seamless pipe facility in Abu Dhabi (KEZAD Zone).
  2. Establishing joint ventures for HSAW and ductile iron pipe facilities in Saudi Arabia.
  3. New projects in GCC region expected to be commissioned within 24 months, impacting financials from FY29.
  4. Optimizing Indian product portfolio and rebalancing sales mix for export and domestic opportunities.
  5. Targeting 2.2 million tons production capacity without additional new plants.

Management Insights

  1. Management views current market conditions as transient, supported by robust order book and liquidity.
  2. Decisive strategic actions are being taken to optimize product portfolio and sales mix.
  3. Committed to capital expenditures across Indian operations to enhance efficiency and modernize assets.
  4. Efforts are focused on long-term viability and transforming the company structure.
  5. Actively exploring other export markets for seamless pipes and increasing DI export component.

Signs of Skepticism

  1. Reliance on future government budget announcements for Jal Jeevan Mission funding without certainty.
  2. Management's inability to provide specific timelines for achieving 15-17% EBITDA margins.
  3. Acknowledging that growth depends on market demand rather than creating it.
  4. The statement that 'everything will work well' regarding government actions seems overly optimistic.

Risk Factors

  1. Water pipe business faces challenges from protracted payment timelines in the Indian water sector.
  2. Lengthy receivables days from public infrastructure projects impact supply chain stability.
  3. Navigating complex volatile geopolitical and economic conditions, including unanticipated tariffs.
  4. Jal Jeevan Mission project implementations in India pose challenges.
  5. DI sector experiences margin compression due to lower demand and higher supply.

Good To Know

  1. Abu Dhabi ductile pipe plant maintained steady operations, delivering 52,000 metric tons in Q3 FY26.
  2. Abu Dhabi subsidiary holds a robust order book of $235 million for 215,000 tons, ensuring 9-12 months stability.
  3. Jindal Hunting JV generated INR137.9 crores revenue and INR44 crores PAT in 9 months FY25.
  4. Jindal ITF vs. NTPC case hearing fixed for February 2nd in Delhi High Court.
  5. Seamless pipe plant in Abu Dhabi is expected to be completed within 2 years due to existing infrastructure.

Key Drivers

  1. New seamless plant in Abu Dhabi.
  2. Saudi JVs boost MENA presence.
  3. Increased export market penetration.
  4. Potential Jal Jeevan Mission revival.

Key Analyst Discussions

Competitive Environment

  1. India's ductile pipe market has grown from 2-3 producers to over half a dozen, increasing capacity to 4 million tons.
  2. Jindal Saw is the only Indian supplier with manufacturing facilities in India and the Middle East.
  3. Peer companies are also expanding globally, setting up plants in KSA.

Market Trends & Consumer Behavior

  1. Strong demand signals persist in the pipe sector across domestic and international markets.
  2. Jal Jeevan Mission (JJM) funding delays have impacted the DI sector, but demand remains.
  3. State governments are initiating new water projects independent of central JJM funding.
  4. Short-term crude price volatility does not impact long-term demand in the oil and gas sector.

Financial Highlights

  1. Q3 saw sequential improvement in EBITDA and PAT, but still lower year-on-year.
  2. Interest cost declined due to lower utilization and negotiations on trade finance instruments.
  3. Working capital intensity and costs may increase with higher volumes, but percentage interest cost to top line will decrease.
  4. Management expects Q4 to be better than Q3, but not reaching previous high margins of 20%.

Product Composition

  1. Ductile iron pipes comprise approximately 40% of the total order book (700,000-750,000 tons).
  2. Seamless pipe production is expected to ramp up to 90,000 tons per quarter in Q4.
  3. New piercing line improves production capacity for larger seamless pipe sizes and overall productivity.
  4. Company aims to increase export share for ductile iron pipes from India.

Strategic Considerations

  1. Company is exploring new export markets beyond the US and Canada for seamless pipes.
  2. Strategic investments in MENA region aim to safeguard market share and cater to local manufacturing incentives.
  3. Focus on increasing export component in DI sector to reduce dependence on domestic market.
  4. Management expects volume growth and operating leverage margin improvement next year.
Jindal Saw Ltd (JINDALSAW) Concall Report Analysis & Insights | Dhanarthi