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WELCORP the flagship company of the Welspun Group has one of the largest
Pipe manufacturing capacities in the World, with an installed line pipe capacity of
1.55 MTPA likely to go up to 2.2 MTPA by beginning of FY12E. Post expansion
WELCORP would become the worlds largest pipe manufacturing company.
Capacity Expansion Well In Place To Support Future Demand
WELCORP is now well placed to grab a larger pie of the pipe demand in USA &
UAE. It recently commissioned 0.3 MTPA HSAW plant in Middle East and 0.35
MTPA HSAW plant along with coating & double jointing facility at Little Rock,
Arkansas, USA. By doing this, WELCORP has grabbed an opportunity to be closer
to its USA & UAE customer. It also commissioned a plant in Mandya, Karnataka
primarily to cater to the domestic demand in the water & sewage segment. The
0.35 MTPA LSAW at Anjar is expected to be operational by Q1FY12E.
Healthy Order Book and Steady Sales Growth
The company has a healthy order book position of ` 50 bn translating into order book
to sales ratio of 0.6x for FY11E. Nearly 56% of order inflows are from HSAW pipes,
35% from LSAW Pipes, 4% from ERW & balance from plates & coils. We expect
volumes & Net Sales to grow at 24% & 17% CAGR for 3 years respectively between
FY10-FY13E. The Net Profit is expected to grow at CAGR 19% for the same period.
One Stop Solution For Pipes
WELCORP has set up a 1.2 MT plates & coil mill in 2008 as a backward integration
process. The company also intends to foray into laying of pipes by acquiring
controlling 61.12% stake in MSK Projects. WELCORP is thus moving towards
becoming a one stop solution for pipes infrastructure.
Foraying New Markets
WELCORP is an established player in USA, Latin America & UAE. The company
is now looking at new markets to establish its presence. By setting up a plant in
Middle East, WELCORP plans to explore African and European markets. it is also
looking forward to foray in to Australian markets.
Outlook & Valuations
At CMP of ` 191, WELCORP, is trading at 4.5x & 3.8x FY12E & FY13E EPS of ` 42.4
& ` 50.7 respectively. On EV/EBITDA WELCORP is attractively trading at 3.2x &
2.3x FY12E & FY13E respectively. We recommend BUY with a 12 months price
target of ` 253 excluding the value of Welspun Projects. At our target price, the
stock is valued at 6x & 5x FY12E & FY13E earnings respectively and at an EV/
EBITDA of 4x & 3x FY12E & FY13E respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
WELCORP the flagship company of the Welspun Group has one of the largest
Pipe manufacturing capacities in the World, with an installed line pipe capacity of
1.55 MTPA likely to go up to 2.2 MTPA by beginning of FY12E. Post expansion
WELCORP would become the worlds largest pipe manufacturing company.
Capacity Expansion Well In Place To Support Future Demand
WELCORP is now well placed to grab a larger pie of the pipe demand in USA &
UAE. It recently commissioned 0.3 MTPA HSAW plant in Middle East and 0.35
MTPA HSAW plant along with coating & double jointing facility at Little Rock,
Arkansas, USA. By doing this, WELCORP has grabbed an opportunity to be closer
to its USA & UAE customer. It also commissioned a plant in Mandya, Karnataka
primarily to cater to the domestic demand in the water & sewage segment. The
0.35 MTPA LSAW at Anjar is expected to be operational by Q1FY12E.
Healthy Order Book and Steady Sales Growth
The company has a healthy order book position of ` 50 bn translating into order book
to sales ratio of 0.6x for FY11E. Nearly 56% of order inflows are from HSAW pipes,
35% from LSAW Pipes, 4% from ERW & balance from plates & coils. We expect
volumes & Net Sales to grow at 24% & 17% CAGR for 3 years respectively between
FY10-FY13E. The Net Profit is expected to grow at CAGR 19% for the same period.
One Stop Solution For Pipes
WELCORP has set up a 1.2 MT plates & coil mill in 2008 as a backward integration
process. The company also intends to foray into laying of pipes by acquiring
controlling 61.12% stake in MSK Projects. WELCORP is thus moving towards
becoming a one stop solution for pipes infrastructure.
Foraying New Markets
WELCORP is an established player in USA, Latin America & UAE. The company
is now looking at new markets to establish its presence. By setting up a plant in
Middle East, WELCORP plans to explore African and European markets. it is also
looking forward to foray in to Australian markets.
Outlook & Valuations
At CMP of ` 191, WELCORP, is trading at 4.5x & 3.8x FY12E & FY13E EPS of ` 42.4
& ` 50.7 respectively. On EV/EBITDA WELCORP is attractively trading at 3.2x &
2.3x FY12E & FY13E respectively. We recommend BUY with a 12 months price
target of ` 253 excluding the value of Welspun Projects. At our target price, the
stock is valued at 6x & 5x FY12E & FY13E earnings respectively and at an EV/
EBITDA of 4x & 3x FY12E & FY13E respectively.
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