Sun TV, Jindal Power and Steel, DLF, Mahindra and Mahindra, Tata Communications, Corporation Bank, Patni Computer Systems, Voltas, Jubilant Organosys

Sun TV, Jindal Power and Steel, DLF, Mahindra and Mahindra, Tata Communications, Corporation Bank, Patni Computer Systems, Voltas, Jubilant Organosys, Havells, Phoenix Mills, Sobha Developers, Ashok Leyland, Welspun Gujarat, Cadila Healthcare

Sterlite Industries, Petronet LNG, NTPC, Motilal Oswal, Taj GVK, Welspun Gujarat, Shree Renuka Sugars, PTC

Sterlite Industries, Petronet LNG, NTPC, Motilal Oswal, Taj GVK, Welspun Gujarat, Shree Renuka Sugars, PTC

Welspun Gujarat Stahl

Investors can consider buying shares in steel pipe maker, Welspun Gujarat Stahl. The price of Rs 277 gives the company a price earnings of 11.3 times the trailing four quarter earnings.

An integrated business model, improving margins and product mix and impending domestic and global demand make this business attractive. The above considerations may justify the premium over sector peers such as MAN Industries, PSL and Jindal SAW, which trade at seven times, eight times and 10.6 times respectively.

Over 80 per cent of the company's sales are accounted for by exports to markets such as the US and Canada. Sales and net profits have grown at a compounded rate of 54 per cent and 58 per cent between FY-05 and FY-09.

The first nine months of FY-10 saw sales rise by 27 per cent and operating profits by 77 per cent on the back of expanded capacity and lower raw material costs compared to the same period last year.

The company's order book stands at Rs 7,800 crore, which is just over one time the estimated FY-10 revenues. . The company's leverage as of March 31, 2009 stood at 1.4:1, which is higher than peers. However, with a good portion of the capacity expansion programme implemented, capital needs over the next few years may moderate. Interest coverage over the trailing 12 months stood at a comfortable 4.6 times (EBIT/interest costs).

The other possibly explosive driver could be government spending on water and sewage management for urban areas whose allocations are encouraging signs of things to come.

Growth drivers

Welspun produces 1.5 million tonnes of pipes at manufacturing locations in Gujarat and the US. The company produces 900,000 tonnes of helical submerged arc-welded (HSAW) pipes, 350,000 tonnes of longitudinal submerged arc-welded (LSAW) pipes and 250,000 electric resistance-welded pipes (ERW).

They are expected to add 600,000 tonnes over the next two years. Capacity utilisation figures which averaged 65 per cent through FY-09.

Simdex, which publishes upcoming pipe projects, indicates about 320,000 km of pipeline to be laid globally over the next five years.

This works out to 65 million tonnes of demand for the next five years at an approximate cost of $70 billion. Bulk of this demand will come from the US and Asia.

Welspun may have an edge by virtue of having supplied and being accredited by global oil majors, including Chevron and Aramco.

Domestic scenario

India's own natural gas plans include 7,500 km worth of gas pipeline spending over the next two years translates into 1.5 million tonnes of piping. Sewage lines and water lines will be another source of demand with both being an important part of the governments plan to improve rural life and upgrade decaying urban infrastructure. Roughly Rs 80,000 crore is expected to spent over the next five years under the Urban Renewal Scheme to improve waste management and water lines. All of the above make for a healthy demand side of the equation over the next five years.

. Welspun recently started producing its own slabs and coils which should give it tighter control over its supply chain, considering the risk a tightly supplied domestic market poses.

The biggest cost component remains steel, whose depressed prices through a large part of 2009 helped producers.

Raw material cost pressures and demand recovery are driving up steel prices this year and will result in margin pressure on pipe-makers, whose ability to pass on costs may be limited, given the abundant capacity.

Moves towards vertical integration include the recent Rs 400-crore acquisition of MSK Projects through a recently-formed subsidiary, Welspun Infratech.

The acquisition was funded through internal accruals. The intended 75 per cent stake in MSK will result in the ability to build pipes and lay them through the engineering, procurement, construction model.

This move would give the company a presence in the construction segment through MSK's Rs 500-crore order book.

Risks

A weakening dollar can result in lower realisation. This is hedged by raw material purchases from abroad and forward currency contracts.

Welspun Gujarat

Welspun Gujarat

GSPL, Bharti Airtel, HPCL, BPCL, IOC, Mahindra and Mahindra, Grasim Industries, Welspun Gujarat, Valuations, Automobiles

GSPL, Bharti Airtel, HPCL, BPCL, IOC, Mahindra and Mahindra, Grasim Industries, Welspun Gujarat, Valuations, Automobiles

Larsen Tourbo, Bajaj Auto, Welspun Gujarat, Zee Entertainment, Polaris Software, Bharti Airtel, Sterlite Industries, India Economy

Larsen Tourbo, Bajaj Auto, Welspun Gujarat, Zee Entertainment, Polaris Software, Bharti Airtel, Sterlite Industries, India Economy

Welspun Gujarat

Welspun Gujarat

Welspun Gujarat Stahl Rohren

Investors with a high-risk appetite can consider accumulating the stock of Welspun Gujarat Stahl Rohren, a leading manufacturer of steel pipes. At the current market price of Rs 80, the stock trades at about five times its estimated FY10 per-share earnings. Besides attractive valuations, the company’s buoyant order book and well-entrenched relationship with global oil and gas players also makes it a good investment.

New business opportunities, in terms of setting up of pipe infrastructure network, driven by the commencement of the KG Basin gas supply by Reliance Industries and city gas distribution initiatives of the Government, also brighten prospects. Given the recent surge in the markets, phased accumulation is recommended for the stock.

Over the last few months, falling crude oil prices had sent the stock price of Welspun Gujarat into a downward spiral on concerns that this would eventually lead to a drastic decline in oil and gas capital expenditure. But despite the downturn, the company has managed to add significantly to its order book, which currently stands at about Rs 9,300 crore (2.4 times FY08 revenues). Not only does that reflect well on the company’s ability to procure business during tough times, it also provides revenue visibility that is higher than that enjoyed by peers.

As the bulk of these orders are with established global players, the risk of cancellations and postponements for its orders are lower. The company has also completed the commissioning of its helical pipe manufacturing facility in the US. Endowed with a capacity to produce 3 lakh tonnes of HSAW pipes, this facility has also received API accreditation.

News of order wins by both the domestic and the new site in the US may be the key triggers for the stock price in future.

For the quarter ended December 2008, even as the company managed to grow its revenues by over 40 per cent, it disappointed on both the margin and profits front. Led by writedown of inventories (Rs 38.5 crore) and forex losses (Rs 41.9 crore) due to re-alignment of creditors and ECBs, Welspun suffered a contraction in both operating and net profit margins.

While operating profit margins dropped seven percentage points to 10.2 per cent, its earnings nearly halved as compared with the corresponding quarter last year. Had it not been for these provisions, the company would have seen a mild increase in profits. In this context, the recent relaxation of mark-to-market norms may boost the reported numbers. The risk to realisations and to the outstanding loan amounts due to rupee fluctuations, however, remain.

Tulip Telecom, Viceroy Hotels, Visa Steel, Welspun Gujarat

Tulip Telecom, Viceroy Hotels, Visa Steel, Welspun Gujarat

Welspun Gujarat Stahl Rohren

Fresh investments with a two-three year perspective can be made in the stock of leading steel pipe manufacturer Welspun Gujarat Stahl Rohren .

The stock price has corrected significantly in the last couple of months following concerns that the fall in crude prices may possibly scale down the capex by global oil and gas companies.

This may be true of the incremental or fresh capex of these companies but it is unlikely that the plunge in oil price may affect the ongoing capex. To that extent, the company’s order book of over Rs 9,500 crore, executable over the next year and half, provides comfort.

At the current market price of Rs 91, the stock trades at about five times its likely FY-09 per share earnings, leaving ample scope for appreciation in the coming years.

Investors, nevertheless, should consider accumulating this mid-cap stock in lots since it may be subject to heightened volatility in price.

Demand scenario

To say that the global demand for pipes would continue to remain buoyant despite the global economic slowdown would be an exaggeration, as spends by oil and gas companies on E&P (exploration and production) activities may slow down.

However, it is unlikely to affect the expansion already undertaken by oil and gas majors.

Spends on pipelines happen only in the last leg of the entire capex and, thus, order flows from ongoing capex, may last a while. This does away with concerns that there may be any significant slowdown in demand for pipes in the foreseeable future.

Besides, demand may also get a lift from the need to replace some of the existing pipe networks in the US. That over 60 per cent of the existing line pipe network (over 1.5 million miles) in the US is over 30 years old and would soon be due for replacement, also lends ‘replacement’ market potential.

Strong presence in the export market and established relationships with many global oil and gas majors (in the US as well) reflect well on Welspun’s ability to grow its revenues, albeit at a slower pace.

The company’s order book, pegged at about Rs 9,500 crore (2.4 times FY-08 revenues), reinforces its stable prospects.
Financials

For the quarter ended September 2008, the company registered a 60 per cent growth in sales. Pipe volumes remained robust, witnessing a 34 per cent increase, while realisations grew by 12 per cent.

But the high sales volumes in Q2 were partly due to the deferment of shipments from first quarter when the government had imposed export tax on steel pipes. Blended pipe realisations that were up 4 per cent on a year-on-year basis registered a fall of over 7 per cent sequentially.

Operating margins, owing to higher raw material cost declined by 6 percentage points to 10.5 per cent.

Profits however declined by over 21 per cent due to forex losses (on account of realignment of net foreign currency exposure and ECB) of over Rs 88 crore during the quarter. If not for the forex loss, the company’s performance was commendable.
Concerns

The company’s steel plate facility, which was initially intended for both captive use and commercial purposes, however, may prove to be less of a money-spinner than expected.

After the recent fall in steel prices, which has made the commercial sale of steel plates less profitable, the management has reduced its plate production guidance to 340,000 tonnes (for this year) from 600,000 tonnes in the beginning of the year.

Instead, it plans to focus on using its plate facility for captive consumption and for upgrading it to manufacture pipes for critical applications such as the for the power sector.

While for now the company’s dependence on the US (45 per cent of its revenues) does not ring any alarm bell, given the possibility that the capex on pipeline network will continue, it may backfire if the US economy remains in recession for more than a couple of years.

In such a scenario, Welspun’s spiral pipe manufacturing facility (expected to be commissioned by Q3 FY-09) in the US may also prove counterproductive. The company may then need to increase its revenue share from countries in West Asia and South America and even India.

Till such time, trends in order inflows for the company over the next two-three quarters may bear a close watch.

Reliance Power, Welspun Gujarat, Unitech, Suzlon Energy

Reliance Power, Welspun Gujarat, Unitech, Suzlon Energy

Welspun Gujarat Stahl Rohren

Welspun Gujarat Stahl Rohren

Chemicals, Sterlite Industries, Welspun Gujarat, India Economy, India Media, India Utilities

Chemicals, Sterlite Industries, Welspun Gujarat, India Economy, India Media, India Utilities

Welspun-Gujarat Stahl Rohren

We recommend a buy in Welspun-Gujarat Stahl Rohren from a short-term perspective. From the charts of Welspun-Gujarat Stahl Rohren we observe that it has been moving down steadily since it recorded the peak at Rs 537 in January. This decline halted in July at Rs 269. This is a significant support level and the stock has reversed firmly from here. The reversal gained impetus by the positive divergence in the weekly relative strength index (RSI).The RSI in the daily chart too is moving in to the bullish region, denoting that this up trend can gain strength. Another oscillator, the daily moving average convergence and divergence has also entered the positive territory. The stock is currently positioned above its 21 and 50-day moving averages denoting a short-term trend reversal. We are bullish on the stock in the short-term horizon. We expect its current up move to prolong until it hits our price target of Rs 387 in the upcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 332.

via BL

Piramal Healthcare, Welspun Gujarat

Piramal Healthcare, Welspun Gujarat

Welspun Gujarat Stahl Rohren

Welspun Gujarat Stahl Rohren

Welspun Gujarat

Welspun Gujarat

Opto Circuits, Ranbaxy Labs, Welspun Gujarat

Opto Circuits, Ranbaxy Labs, Welspun Gujarat

Welspun Gujarat

We recommend a sell in Welspun-Gujarat Stahl Rohren at current market price. The chart of the Welspun-Gujarat Stahl Rohren suggests that the stock had been on a steady bull run from its March 2007 low of Rs 90 till it marked a life high of Rs 537 in mid of January 2008. However, after marking life high, the stock reversed direction and began to decline. The prolonged bearish divergence in the weekly momentum indicator and the weekly moving average convergence divergence lines in the overbought region have strongly supported this reversal. On January 21, the stock tumbled 14 per cent, penetrating the intermediate up trendline as well as the 21-day and 50-day moving average lines. The daily momentum indicator is likely to enter the bearish zone and the weekly momentum indicator is likely to enter the neutral region from the bullish zone. On the upside, the immediate resistance for the stock is at Rs 462 and the subsequent resistance is at Rs 490 levels. The short-term investors can book profit or sell the stock while keeping the stop-loss at Rs 455 level. Considering the above arguments, we expect the stock to decline further in the short-term to the immediate support level of Rs 370.

Welspun Gujarat Q3FY08

Welspun Gujarat Q3FY08