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Jindal Saw Ltd

| Q4 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤5th May 26

Summary : Jindal Saw faced Q4 and FY26 declines due to MENA conflict and domestic water project delays, but sees future growth from new projects and strategic expansions.

Management Perspective neutral : Management noted Q4 performance did not meet expectations and described current times as 'unpredictable, unprecedented.' However, they also highlighted a 'robust debt profile' and 'creating new avenues for growth,' indicating cautious optimism.

Concall Report Analysis & Insights

Business Overview

  1. Jindal Saw manufactures various pipes, including ductile iron, carbon seamless, and stainless steel.
  2. Q4 FY26 and full year FY26 saw significant declines in income, EBITDA, and PAT.
  3. The company maintains a robust debt profile with reduced net debt.
  4. Operations were impacted by MENA conflict and domestic water infrastructure challenges.
  5. Strategic expansions are underway with new plants in Abu Dhabi and Saudi Arabia.

Future Growth Prospects

  1. New pipeline infrastructure investments are expected in the MENA region.
  2. India's fast-track pipe gas rollout and ONGC deepwater projects create new demand.
  3. Strategic expansions in Abu Dhabi and Saudi Arabia are progressing.
  4. Jal Jeevan Mission revival and state-backed funding should boost water pipe business.
  5. Seamless segment margins are expected to improve with robust demand.

Management Insights

  1. Q4 FY26 performance fell short of expectations due to deferred exports and domestic challenges.
  2. The debt profile is robust despite business volatility, with reduced net debt.
  3. Actively pursuing strategic expansions in MENA to capitalize on new infrastructure opportunities.
  4. Mitigating API seamless pipe impact by leveraging flexible manufacturing capabilities.
  5. Acknowledges unpredictable times, focusing on safeguarding interests and domestic market ramp-up.

Signs of Skepticism

  1. Management's assertion that raw material volatility is passed to manufacturers may be overly simplistic.
  2. Optimism about exponential MENA demand increase due to crisis seems speculative.
  3. Uncertainty persists regarding the full activation of the Jal Jeevan Mission.
  4. No clear timeline was provided for API monogram re-approval.

Risk Factors

  1. Military conflict in MENA region caused logistic disruptions and suspended export shipments.
  2. Weakness in domestic ductile iron pipe segment due to sluggish water infrastructure project execution.
  3. API audit non-conformances temporarily impacted carbon seamless pipe sales.
  4. Rupee depreciation led to significant foreign exchange costs.
  5. Potential oversupply and lower utilization exist in the ductile iron pipe segment.

Good To Know

  1. The company incurred INR48 crores in foreign exchange costs due to rupee depreciation.
  2. Abu Dhabi subsidiary holds a $180 million order book, providing 9 months visibility.
  3. Jindal Hunting joint venture revenue and PAT were lower than the previous year.
  4. Annual capex is expected to be INR500-600 crores this year and INR400-500 crores next year.
  5. Ongoing litigation with NTPC is progressing in Delhi High Court.

Key Drivers

  1. MENA region infrastructure investments.
  2. India's fast-track pipe gas rollout.
  3. ONGC deepwater exploration projects.
  4. Jal Jeevan Mission funding revival.

Key Analyst Discussions

Competitive Environment

  1. Ductile iron pipe segment may face oversupply due to capacity expansions.
  2. Stainless steel business will face margin challenges due to competition.
  3. Company aims for high-end, high-margin products in competitive markets.
  4. Acknowledges competition is good for a healthy market.

Market Trends & Consumer Behavior

  1. MENA region conflict causing severe logistic disruptions and suspended exports.
  2. Jal Jeevan Mission project execution remains sluggish, impacting water pipe business.
  3. New pipeline requirements expected in India for energy security.
  4. ONGC's deepwater exploration projects create new demand avenues.
  5. Domestic seamless pipe demand is robust at 1.5 million tons.

Financial Highlights

  1. Q4 FY26 performance dropped compared to Q3 and FY25.
  2. Full year FY26 income and profitability declined significantly.
  3. Net debt reduced, indicating a robust debt profile.
  4. INR48 crores foreign exchange cost due to rupee depreciation.
  5. Annual capex expected at INR500-600 crores this year.

Product Composition

  1. Temporary impact on API seamless pipe sales due to regulatory issues.
  2. Relocating production to alternative seamless products to mitigate impact.
  3. Focusing on value-added products in the stainless steel segment.
  4. Ductile iron pipe business impacted by water infrastructure challenges.

Strategic Considerations

  1. Strategic shift towards securing energy infrastructure in the MENA region.
  2. Investing in carbon seamless pipe plant in Abu Dhabi and saw pipe JV in Saudi.
  3. Management aims to ramp up domestic operations until export market opens.
  4. Utilizing existing capacity and derisking the business model.