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WELSPUN CORP
OUTPERFORMER (RS167, MCAP: RS38BN / US$830M)
• Welspun’s management has indicated that a significant demand recovery was under way across geographies. A huge
replacement demand in the Gulf of Mexico and an uptick in shale gas capex are two key positive triggers that could
result in increased demand for pipelines in the years to come. The company is positive about the TransCanada order
coming through and is banking on leveraging its superior positioning in the LSAW space. Welspun is also actively
bidding for projects in Europe, where entry barriers have eased.
• The management reaffirmed that it is unlikely to compromise on profitability for higher volumes and a larger order
book by trying to bid extensively for low-margin domestic orders.
• Welspun had an order book of Rs50bn (0.68x FY10 revenues) at the end of Q3FY11, comprising 776,000 tonnes for
pipes and 40,000 tonnes for plates. In terms of volumes, LSAW accounts for 283,000 tonnes, HSAW 458,000 tonnes and
ERW 34,000 tonnes. During the quarter, the company received new export orders worth Rs16.7bn from several
domestic and North American oil & gas players. It believes the recovery in the US, including replacement demand
and breakthrough in shale gas discoveries, is likely to lead to higher order inflows and impart higher visibility on
revenue growth.
• The company is planning to double its LSAW capacity at Anjar to 0.7m tpa (from 0.35m tpa) by Q1FY12. The recently
commissioned 0.1m tpa HSAW plant in Mandya (Karnataka) is on track, with utilization of ~50% in Q3FY11. Welspun
also plans to set up a 0.1m tpa HSAW plant in Madhya Pradesh by FY12. In terms of overseas expansion, the company
has a 50% stake in pipe and coating JV companies Welspun Middle East Pipes Company LLC and Welspun Middle
East Pipes Coating Company LLC in Saudi Arabia, with an ~investment of US$58m. The company will invest another
US$100m to set up the 0.27m tpa HSAW plant. Trial production has already started and the company expects
production to ramp up in Q1FY12.
• Welspun Infra (MSK projects) had revenues of Rs640m, with operating margins close to 9.5%. It has an order book of
close to Rs2000m (~1x FY10 revenues) which it plans to increase to 2x FY11 revenues over the next few quarters. These
plans provide higher revenue growth visibility.
• Parvez Umrigar has joined Welspun Infra as CEO from Gammon Infrastructure.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
WELSPUN CORP
OUTPERFORMER (RS167, MCAP: RS38BN / US$830M)
• Welspun’s management has indicated that a significant demand recovery was under way across geographies. A huge
replacement demand in the Gulf of Mexico and an uptick in shale gas capex are two key positive triggers that could
result in increased demand for pipelines in the years to come. The company is positive about the TransCanada order
coming through and is banking on leveraging its superior positioning in the LSAW space. Welspun is also actively
bidding for projects in Europe, where entry barriers have eased.
• The management reaffirmed that it is unlikely to compromise on profitability for higher volumes and a larger order
book by trying to bid extensively for low-margin domestic orders.
• Welspun had an order book of Rs50bn (0.68x FY10 revenues) at the end of Q3FY11, comprising 776,000 tonnes for
pipes and 40,000 tonnes for plates. In terms of volumes, LSAW accounts for 283,000 tonnes, HSAW 458,000 tonnes and
ERW 34,000 tonnes. During the quarter, the company received new export orders worth Rs16.7bn from several
domestic and North American oil & gas players. It believes the recovery in the US, including replacement demand
and breakthrough in shale gas discoveries, is likely to lead to higher order inflows and impart higher visibility on
revenue growth.
• The company is planning to double its LSAW capacity at Anjar to 0.7m tpa (from 0.35m tpa) by Q1FY12. The recently
commissioned 0.1m tpa HSAW plant in Mandya (Karnataka) is on track, with utilization of ~50% in Q3FY11. Welspun
also plans to set up a 0.1m tpa HSAW plant in Madhya Pradesh by FY12. In terms of overseas expansion, the company
has a 50% stake in pipe and coating JV companies Welspun Middle East Pipes Company LLC and Welspun Middle
East Pipes Coating Company LLC in Saudi Arabia, with an ~investment of US$58m. The company will invest another
US$100m to set up the 0.27m tpa HSAW plant. Trial production has already started and the company expects
production to ramp up in Q1FY12.
• Welspun Infra (MSK projects) had revenues of Rs640m, with operating margins close to 9.5%. It has an order book of
close to Rs2000m (~1x FY10 revenues) which it plans to increase to 2x FY11 revenues over the next few quarters. These
plans provide higher revenue growth visibility.
• Parvez Umrigar has joined Welspun Infra as CEO from Gammon Infrastructure.
The company has invested lot of funds in new plants, expansions, take overs etc., some of which have yet to stabilize production or some are still in construction phase, due to which the company is likely to incur high interest and depritiation in current year as well as in immediate years to follow.How the company will be able to improve its earings and earning per share will determine whether the share value improves or not. Comments requested.
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