Company: Jindal Drilling & Industries Ltd.
Industry: Oil Drilling And Exploration
CMP and PE Ratio: Rs. 386.15 with a PE Ratio of 48.21
Peer Companies for Jindal Drilling & Industries Ltd: Oil & Natural Gas Corporation Ltd, Aban Offshore Ltd and Shiv-Vani Oil & Gas Exploration Services Ltd.
Valuation of Jindal Drilling & Industries Ltd compared to peers: Just based on the PE ratio the valuation for Jindal Drilling looks expensive as compared to its peers.
Financial Analysis:
- Income Statement: The revenue has shown decent growth over the past 5 years with FY 08 EPS for the company at Rs. 8.3. The first nine months of the current fiscal has also been robust with the topline and bottomline showing good growth.
- Cash Flow: Jindal Drilling has been generating positive operating cash flow in the past three years. This is always a good thing in times of slowdown and credit crunch. The company has also made significant capital expenses, particularly in the last fiscal. This should translate into higher revenue growth for the company in the future.
- Balance Sheet: The balance sheet of the company looks good with decent equity and reserves coupled with a low amount of leverage.
Business Analysis:
- Jindal Drilling is 100% into oil drilling and exploration activities. So the growth of the company and its margins largely depends on the crude oil prices, which is a function of the economy. The crude oil prices are expected to remain volatile with a bull run for the commodity not coming anytime soon. So in the next 1-2 years one can expect that the business of the company will remain sublime.
In my opinion Jindal group is an excellent business group and hence the long term prospects for this company should be good. But right now the valuation dont look very compelling for me to go out and buy this stock.
Compared to its peers, the company is trading at a premium and thus, whenever the markets significantly correct again i would expect the stock to come down substantially. Hence, while its a good company if I had to buy a stock in this space today itself I would rather buy a ONGC then Jindal Drilling.
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