Stocks to Watch Out For

Welspun Corp on Order Win

Welspun Corp announced a Rs 611 crore order for line pipes in Latin America. With revenue and profit surging, the company’s strong order book signals a positive outlook.

Welspun Corp: In the Spotlight

On Wednesday, the stock of Welspun Corp Ltd (WCL), a flagship company of the Welspun Group, is likely to attract significant attention. Here’s why Welspun Corp is set to be in focus:

Major Contract Win

Welspun Corp announced the receipt of a binding Letter of Award (LOA) for the export of line pipes from India. The contract, valued at Rs 611 Crore, is for the supply of Longitudinal Submerged Arc Welded (LSAW) Pipes, Coating, and Bends in Latin America. This LOA is subject to conditions precedent and will be followed by a Notice to Proceed or Purchase Order, expected in the second week of May. The execution of this contract is slated for FY25.

Q3 and 9M FY24 Financial Performance

Welspun Corp financial performance has been impressive. The consolidated revenue for Q3FY24 was Rs 4,750 crore, an increase of 98% year-over-year (YoY), while for 9MFY24, it reached Rs 12,878 crore, up by 126%. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for Q3FY24 was Rs 471 crore, a 170% increase, and for 9MFY24, it surged to Rs 1,391 crore, a 332% jump. Profit After Tax (PAT) for Q3FY24 soared over 10 times to Rs 292 crore, while for 9MFY24, it stood at Rs 842 crore, compared to a loss of INR 29 crore in the same period last year. Net debt is reduced to Rs 503 crore at the end of 9MFY24 from Rs 1,837 crore at the end of 9MFY23, driven by strong free cash flows from the business.

Complete Pipe Solutions

Welspun Corp’s line pipe business has shown significant growth in India and the USA. Sales volume for 9MFY24 increased by 65% YoY. The order book for Line Pipes in India and the USA stands at 575 KMT, valued at Rs 7,200 crore. The Associate Company of Welspun Corp, EPIC in Saudi Arabia, has a confirmed order book exceeding two years, and execution of a recent Aramco order of SAR 1.8 billion has started.

In other areas of the business, the sales volume for Ductile Iron (DI) Pipes increased almost tenfold YoY to 135 KMT for 9MFY24. Stainless Steel Bars sales volume grew by 201% YoY to 12,294 MT, while Pipes & Tubes sales volume rose by 23% YoY to about 3,667 MT during 9MFY24.

Market Outlook and Opportunities

The Petroleum and Natural Gas Regulatory Board (PNGRB), in collaboration with City Gas Distribution entities, has launched a campaign from January 26th to March 31st, 2024, to promote the widespread adoption of PNG in households and expand the consumer base across various segments of the population. Water transportation for irrigation projects through line pipes is also expected to grow steadily, given the focus from central and state governments. The export market outlook remains strong, particularly in the Middle East, Australia, and SouthEast Asia. Welspun Corp has been actively booking orders in these regions, and the India order book remains robust at 369 KMT.

Furthermore, there is strong demand for the company’s Helical Submerged Arc Welded (HSAW) pipes in the US market, with the total order book standing at 206 KMT. The company is confident about booking new orders to ensure business continuity.

With such strong indicators and promising developments, Welspun Corp is a stock to keep on your radar. Watch for updates on the LOA and other order wins, as well as the company’s performance in key markets.

Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.