>PIPE INDUSTRY REPORT (VENTURA)

“Profits in the Pipeline”

Commensurate with the global recovery, the pipe industry is expected to benefit considering the quantum of investments proposed for the pipeline projects across the globe. The business potential for the SAW pipe manufacturers from these projects is pegged at US$ 117 billion over the next four to five years. The Indian Pipe manufacturers which have majority of the revenues coming from exports & having accreditations from oil & gas majors across the globe are expected to garner a sizeable share from these projects. In addition to the new projects, the replacement market in North America would be an additional demand driver for the Indian pipe manufacturers. The demand-led growth coupled with healthy order book and capex plans augurs well for the Indian players. We are initiating coverage on the Pipe Industry with the top three picks being PSL, Welspun Gujarat & Jindal Saw.

Key Investment Highlights

■ Demand driven growth to continue
The global pipeline requirements is expected to be ~98 million tons with a total of 710 projects and an opportunity of more than $117 billion across the globe for the next five years. Thus the addressable market for the pipe manufacturers is pegged at $23.4 billion per annum while the tonnage requirement is estimated at 19.6 million tons per annum. With the close proximity to the ports coupled with lower labor cost & locational advantage, Indian players are expected to bag sizeable share of these orders. Further we believe the Indian companies is set to benefit from the proposed gas pipeline network to be built by GAIL, GSPL, and other domestic players,
who have announced plans to construct pipeline transmission networks in India worth over Rs 20,000 crore.

■ High revenue visibility inspires confidence
Indian pipe manufacturers have strong order book despite the challenging circumstances prevalent in the economy. These order books are set to galore with the demand for pipes likely to pick up over the next few years. This provides high revenue visibility for these companies.

■ Positive outlook especially for SAW pipe manufacturers
While the demand for seamless & ERW pipes remain sluggish, the demand for SAW pipes is likely to remain firm as these pipes are basically oil & gas transportation pipes required for setting up oil & gas pipelines. While PSL is purely a SAW pipe manufacturer, Jindal Saw & Welspun Gujarat have majority of the revenues coming from this segment.

To see full report: PIPE INDUSTRY