New Delhi, Oct 27: An impressive first-quarter bottomline growth, notwithstanding the drop in sales, and bright prospects make Saw Pipes an obivious choice for punters. Thanks to a 151 per cent jump in net profit for the quarter-ended September 30, 1999, and orders worth Rs 195 crore in hand, the stock has a long way to go. The scrip currently trades at Rs 53.95, at a PE of 10.54 times, and is expected to cross the Rs 75-mark soon.On October 5, 1999, the stock was changing hands at Rs 35.5 and has moved up, since then, by 54 per cent. In the last eight trading sessions, the counter has witnessed high volumes of aroud 35,000 shares per day.
The rise in the stock price is notwithstanding a lockout since July 23, 1999, in its seamless division at Nasik. Due to the lockout, sales droped by 43 per cent from Rs 71.4 crore to Rs 41.04 crore in the first-quarter. But a higher drop of 54 per cent in total expenditure has led to a rise in the operating profit margin from 18.7 per cent to 36.69 per cent. A lower interest cost further helped improve the profit margins. The company's gross has profit improved from Rs 4.55 crore to Rs 8.02 crore, a jump of 76.26 per cent.
With the steel sector expected to turn the corner soon, the future seems bright Saw Pipes. The company has orders (both exports and domestic) worth Rs 195 crore in hand and this includes a prestigious World Bank-funded pilot funded export order for about US $ 6 million from China. This is the first time that this type of an order has been awarded to any developing country for this product. The company has been recieving a lot of enquiries and in order to cater to the needs of the market, Saw Pipes is setting up a 100-per cent export-oriented unit at Mundra in Gujarat with a capacity of 1,00,000 tonne of longitudinally-welded pipes. Saw Pipes has an existing capacity of 2.5 lakh tonnes, while the US-based Saw Pipes Inc has an existing capacity of 5 lakh tonne per annum. Combining both the mills in India and the US, the capacity is 7.5 lakh tonne per annum, which is one of the largest in the world. This will be further enhanced to 8.5 lakh tonne per annum with the new facility at Mundra.
According to analysts, the fundamental strength of Saw Pipes is its capacity to innovate and its ability to be globally competitive. With `competitive' scrips being the latest craze of the market, the scrip should witness a re-rating by operators. Analysts feel the stock at current levels is undervalued.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.