Welspun Corp shares surge 28% in six-day rally, breach fresh target price; what's next?

Welspun Corp Ltd shares extended their rally for a sixth straight session on Monday, rising 4.05 per cent to hit a high of Rs 2,400, up from Friday's close of Rs 2,306.40. The move took the stock past the Rs 2,363 per share target price set by Systematix Research, with the broader rally taking the stock up 28 per cent in six straight sessions.

The Welspun Corp stock was also on the verge of breaching Nuvama's revised target price of Rs 2,437. Other brokerages remained more bullish, with Investec maintaining a 'Buy' rating and a target of Rs 2,878, while Equirus Securities has set a target of Rs 3,107. Systematix has retained a 'Hold' rating after factoring in the company's largest-ever single order, worth $1.8 billion.

The US order involved supplying pipes for the evacuation and transportation of more than 3 billion cubic feet of gas from the Permian Basin to the Gulf Coast.

According to Systematix, the order has significantly strengthened Welspun Corp's order book, taking it from Rs 25,750 crore to Rs 42,100 crore, and has improved revenue visibility for FY28 and FY29. The brokerage said the company's medium-term outlook is supported by its record order book, with 60-65 per cent concentrated in the US, and by execution visibility extending through FY29. It said the US business is likely to remain the main earnings driver, helped by capacity expansion and sustained demand.

Systematix also raised its FY27 and FY28 EBITDA estimates by 10-11 per cent and its PAT estimates by 8-10 per cent, while introducing FY29 estimates. It said, 'We expect Welspun Corp to deliver revenue/EBITDA/PAT CAGR of 26 per cent/28 per cent/29 per cent over FY26-FY29E and value WLCO on a SoTP basis on 1HFY29E EV/EBITDA and revise our target price to Rs 2,363/share (Rs 1,794/share earlier).'

Equirus Securities on August 23 said that the order gives the company substantial multi-year revenue visibility. It said that while the company did not provide exact EBITDA per tonne guidance for the order because of its long execution period, management indicated that US operating margins usually remain attractive. Equirus added, 'Though no specific absolute EBITDA target was given, the management indicated that the company is directionally moving towards ~Rs 50bn of EBITDA over the next 3-4 years, supported by the strong US demand environment, expected demand from M.E. and timely capacity expansion.'

The brokerage also said multiple discussions are under way on the expansion of Saudi pipelines and the water network, and that these could translate into orders in H2FY27, smoothing the path for long-term top-line growth. Nuvama said that in the Middle East, nearly 20 per cent of LNG supply has been disrupted and Welspun Corp expects higher pipe demand as restoration activities come up over the next three to five years. It added that the US, the largest exporter of LNG, has continued to ramp up spending to fill the global supply gap.

In a note dated August 21, Nuvama said, 'With LNG terminals expanding the CGD network (in view of the LPG shortage), the Indian line pipes business is likely to report elevated demand.' Management has continued to guide for EBITDA of INR28bn in FY27E and said that doubling EBITDA by FY30 does not seem distant if all geographies fire. The latest rally in the stock comes as brokerages factor in stronger order inflows, improved execution visibility and demand support across the US, Middle East and India.