Analyst expects oil prices to rise above US$100/bl by early 2011 compared to about US$80/bbl now. This indicates a positive outlook for about 30% of pipeline demand that is linked to oil. However, a dominant 60% of pipeline orders are linked to natural gas price outlook. We expect natural gas prices to remain subdued at current levels owing to oversupply.
Expect sales growth of Jindal Saw and Welspun to slow down to 11-13% in FY11-12E compared to 20% CAGR in FY07-09. This is likely to be a result of of
(1) decline in new pipeline construction in key markets like the US and Middle East owing to a subdued natural gas price, and (2) sharper increase in capacities
by competitors compared to demand growth.
