1. One of the largest manufacturers of large diameter pipes globally
welspuncorp.com | NSE : WELCORP
Top 3 global Line Pipe manufacturer
The company also manufactures BIS-certified Steel Billets, TMT (Thermo Mechanically Treated) Rebars, Ductile Iron (DI) Pipes, Stainless Steel Pipes, and Tubes & Bars.
The company recently acquired Sintex-BAPL, a market leader in water tanks and other plastic products, to expand its building materials portfolio.
It has also acquired specified assets of ABG Shipyard with a potential to enter Defence and commercial shipbuilding, green steel, ship breaking, and ship repair.
2. FY13-23: An Average business
Nothing bad, nothing spectacular to talk about
Went nowhere in the last decade
Consistent Performance over the last 10 years: EBITDA in the range of INR 800 – 1200 crores per annum from Line Pipes Business
3. Weak FY23: PAT down 53% & Revenue up 50% YoY
4. Strong Q1-24: PAT up 3924% and Revenue up 208% YoY
Q1-24 Results are strong on a QoQ basis
5. Strong Q2-24: Revenue up 107% YoY & back in profit
PAT up 41% and Revenue up 3% QoQ
6. Strong H1-24: Revenue up 147% YoY & back in profit
7. Business metrics: Return ratios improving in H1-24
FY24 ROCE guidance of 16%, 2X+ over FY23 ROCE
8. Outlook: 50% revenue growth and 90% EBITDA growth in FY24
i. Progress till H1FY24 has been in line with our guidance
EPS Guidance for FY24 should be beaten as H1-24 EPS = 20.98
9. 90% EBITDA growth & 50% revenue growth in FY24 at a PE of 17
10. So Wait and Watch
If I hold the stock then one may continue holding on to WELCORP
Coverage of WELCORP was initiated after Q1-24 results. The investment thesis has not changed after a strong H1-24. The only changes are the delivery of a strong H1-24 and the increased confidence in the management to deliver a stronger FY24
There is a strong possibility of FY24 guidance to be beaten.
WELCORP does not have a consistent track record of delivering growth. One needs to monitor execution on its guidance quite closely and then look at the guidance for FY25.
11. Or, join the ride
If I am looking to enter WELCORP then
WELCORP is guiding for 90% EBITDA growth & 50% revenue growth in FY24 at a PE of 17 which makes the valuations reasonable.
WELCORP generated Rs 950 cr in H1-24. It is available at free cash flow yield of 6.95% (not annualized) which makes the valuations quite attractive.
WELCORP is at a market cap to FY24 sales of less than 1
Previous coverage of Kilburn
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Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades