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UBS Investment Research
Welspun Corp
New order win supports outlook
Wins new orders worth Rs11.8bn, expands order book to Rs61.5bn
Welspun Corp (WLCO) bagged new orders worth Rs11.8bn, taking their order
book to ~Rs61.5bn currently from Rs50bn, as at end Q3FY11. This indicates total
order book of ~932kMT of pipes and 40kMT of plates (excludes Q4FY11
execution). This indicates an 8-10 months revenue visibility. This is in line with
our positive and reviving pipes industry outlook.
No clarity yet on the SEBI issue
We don’t have any incremental clarity on the SEBI issue. We think the company
will likely pursue professional and legal advice and try to resolve the same. While
this is unlikely to impact the company’s business (reasonable balance sheet), it
may keep investor sentiment capped over the medium term.
Stock trades at FY12 P/E of 5.5x; discount to peer group
Welspun currently trades at FY12 P/E of 5.5x, discount to peer median of 9.5x,
Jindal Saw valuations and slight discount to Indian peer median. We believe the
discount is due to the SEBI issue on promoter related entities. The stock price has
partly recovered by ~33% from Rs148-150 in mid Jan 2011.
Valuation: Maintain Buy on fundamentals and PT of Rs 250/share
WCL continues to deliver reasonable operational performance. We maintain Buy
and UBS-VCAM based TP of Rs 250. Yet, medium term sentiment will be driven
by SEBI order developments. We await more clarity on same.
Welspun Corp
Welspun Corp is the flagship company of Welspun Group. It is one of the
largest pipe manufacturing companies in the world. Incorporated in 1995, the
company offers a complete range of high grade pipes, ranging from half an inch
to the 100 inches used to transport oil and gas. In addition to pipe manufacturing
it offers coating, bending and double jointing facilities to its customers. The
company's subsidiaries include Welspun Pipes, Welspun Natural Resources,
Welspun Pipes, Welspun Trading and Welspun Infratech.
Statement of Risk
FX fluctuations, sharp steel price volatility (70% of the cost of pipe
manufacturing), unrelated diversification, higher competition and a slowdown in
global pipeline capex are the main risks to pipe companies and our estimates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Welspun Corp
New order win supports outlook
Wins new orders worth Rs11.8bn, expands order book to Rs61.5bn
Welspun Corp (WLCO) bagged new orders worth Rs11.8bn, taking their order
book to ~Rs61.5bn currently from Rs50bn, as at end Q3FY11. This indicates total
order book of ~932kMT of pipes and 40kMT of plates (excludes Q4FY11
execution). This indicates an 8-10 months revenue visibility. This is in line with
our positive and reviving pipes industry outlook.
No clarity yet on the SEBI issue
We don’t have any incremental clarity on the SEBI issue. We think the company
will likely pursue professional and legal advice and try to resolve the same. While
this is unlikely to impact the company’s business (reasonable balance sheet), it
may keep investor sentiment capped over the medium term.
Stock trades at FY12 P/E of 5.5x; discount to peer group
Welspun currently trades at FY12 P/E of 5.5x, discount to peer median of 9.5x,
Jindal Saw valuations and slight discount to Indian peer median. We believe the
discount is due to the SEBI issue on promoter related entities. The stock price has
partly recovered by ~33% from Rs148-150 in mid Jan 2011.
Valuation: Maintain Buy on fundamentals and PT of Rs 250/share
WCL continues to deliver reasonable operational performance. We maintain Buy
and UBS-VCAM based TP of Rs 250. Yet, medium term sentiment will be driven
by SEBI order developments. We await more clarity on same.
Welspun Corp
Welspun Corp is the flagship company of Welspun Group. It is one of the
largest pipe manufacturing companies in the world. Incorporated in 1995, the
company offers a complete range of high grade pipes, ranging from half an inch
to the 100 inches used to transport oil and gas. In addition to pipe manufacturing
it offers coating, bending and double jointing facilities to its customers. The
company's subsidiaries include Welspun Pipes, Welspun Natural Resources,
Welspun Pipes, Welspun Trading and Welspun Infratech.
Statement of Risk
FX fluctuations, sharp steel price volatility (70% of the cost of pipe
manufacturing), unrelated diversification, higher competition and a slowdown in
global pipeline capex are the main risks to pipe companies and our estimates
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