Up 230% in a year! Brokerages see more steam left in this multibagger

Brokerage firms including JM Financial and Arihant Capital Markets continue to remain positive on Welspun Corp Ltd following its results for the December 2023 quarter. The company announced its earnings for the period ended on December 31, 2023 earlier this week.

Welspun Corp Ltd posted a multi-fold jump in its consolidated net profit at Rs 293.70 crore in the quarter ended December 2023. The company had reported a net profit at Rs 23.22 crore in the year ago period. Its revenue from operations almost doubled to Rs 4,750 crore in the Q3FY24.

Ebitda for the third quarter of the ongoing fiscal came in at Rs 471 crore, up 170 per cent on a year-on-year (YoY) basis. The company reduced its debt to Rs 503 crore from Rs 1,837 crore in the year ago period, said the company in its media statement. Sales volume of line pipe businesses in India and the USA for 9MFY24 rose 65 per cent YoY, it said.

Welspun Corp Ebitda came in lower sequentially due to under-performance in India line pipe operations, said JM Financial. The contract with Aramco (line pipes) has started to materialize leading to improved financial performance in the Saudi business and the company earlier approved brownfield capex of Rs 300 crore in DI Pipe segment to increase capacity by 100ktpa, it said.

The FY24 guidance remains intact and the order book for the line pipe segment in India, US and Saudi Arabia stands at about 2-3 quarters, valued at Rs 7,200 crore(ex Saudi Arabia). DI Pipes order book stands at over 1 year of execution valued at Rs 2,200 crore. Sintex recently announced foray into PVC pipes segment with potential market size of Rs 60,000 crore by FY25, it said.

"The company further announced the setting up of a 150ktpa DI pipe manufacturing facility in the Middle East with planned capex spends of Rs 500 crore operational by 1HCY25. Improved scale across businesses buoyed by macros will help capitalize on operating leverage, while strong cash flows will further reduce financial leverage," JM added, maintaining a buy with a target price of Rs 660.

Shares of Welspun Corp were trading slightly lower on Thursday, around Rs 590 levels. The stock has surged more than 230 per cent from its 52-week low at Rs 177.85 hit in February 2023. The total market capitalization of the company stood more than Rs 15,000 crore for the day.

The company is confident of crossing their guidance of Rs 15,000 crore topline and Rs 1,500 crore of EBITDA with 16 per cent ROCE for FY24. The line pipe bid book has slowed down a bit but orders for the Permian basin (USA) are expected to come in the next 2 months. Extremely strong performance by company and the outlook suggests similar performance, said Arihant Capital Markets.

The company has registered strong volumes on DI Pipes. TMT Bars and Sintex are picking up slowly as well. Nauyaan Shipyard scrap 60 per cent is sold and the remainder will be sold in 3-4 months. WSSL is performing well. The only region to watch out for is the USA where order inflow is expected which will be a key trigger line pipe business, it said.

"We continue to remain positive on the company’s performance but we change our rating to 'accumulate' for the time being, the key reason is to monitor the order inflow in US business. Apart from the US business, all other businesses have strong future visibility. We upgrade our target to Rs 668," Arihant added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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