Welspun Corp formerly Welspun Gujarat Stahl Rohren, is the flagship company of the Welspun Group. It has one of the largest pipe manufacturing company in the world. The company aims to be a one stop solution in the line pipe segment, i.e. ripe the advantages of being present in manufacturing to laying of pipes, thus controlling the entire value chain.
Its Q3 result, on the standalone figures provided on the BSE website, reports that the company's revenue has fallen by 19.96% quarter-on-quarter (q-o-q), while on an annual level (y-o-y) the fall was 25.34%. Net profit has increased by 29.51% (q-o-q) to Rs 65.17 crore, although the same had fallen by a massive 48.97% (y-o-y) basis. Other income had increased to Rs 3.77 crore i.e. by 42.8% (q-o-q). The company's operating profit margin went down by 2.15 percentage points (y-o-y), meanwhile the same was up 5 percentage points (y-o-y).
On the consolidated basis, as stated in the company's press release, Welspun saw its sales slide by 3% (y-o-y) for Q3FY11. Where as, total sales for the period of 9 months was up by 2% over the previous year for the same period. The effect resonated in profit after tax or net profit; net profit declined by 12% from Rs 166.8 crore in Q3 FY10 to Rs 146.5 crore in Q3FY11, but net profit for 9 months of FY11 was more than that of FY10; it saw an increment of 16%. Net profit margin had reduced by 1 percentage points (y-o-y) on a consolidated basis, although if net profit margin for the first 9 months of FY11 is compared to that of FY10 then, the net profit margin had improved by 1.1 percentage points.
According to India Infoline Research, 'operating profit declined by 9% (q-o-q) to Rs 3,100 crore on account of lower pipe sales volumes.' It further added that management indicated EBIDTA/ton for pipes decreased from Rs11,800 in Q2 FY11 to Rs10,000-11,000 in Q3 FY11; EBIDTA/ton for plates went from Rs 5,500 in Q2 FY11 to Rs 5,000 in Q3 FY11. The management maintained its EBIDTA/ton guidance of Rs10,500-11,000 in the coming orders
Welspun Corp's current order book stands at Rs 5,000 crore giving visibility into the future. Its US facility is completely booked for the next one year. The company also recently bagged an order for supplying pipes for shale gas, which supports the view of various analyst that it will lend strength to the business opportunity in shale gas in US. Considering the new round of investment that is expected, the has the potential to be a strong performer.
With rise in crude oil prices and the nuclear disaster in Japan, it will not be surprising to witness a new surge in order inflows, thus providing an ideal opportunity for a long-term investor. But a risk averse should stay away from the stock till a final decision is delivered by the SEBI.