Recommendation: Buy
Current price: Rs 71 (at the time of publishing this tip)
Target price: Rs 110
Key points:
- Welspun Gujarat registered good growth in the topline on account of higher realisations but the EBITDA margin declined significantly to 9.8%. The profitability declined 53% YoY due to higher interest and depreciation costs. The PAT of the company declined to Rs 45.31 crore resulting in a quarterly EPS of Rs 2.43.
- The company registered sales growth of 41% YoY to Rs 1456.63 crore on the back of higher realisations linked to high raw material prices and plate sales. The EBITDA declined significantly to Rs 142.88 crore on account of exceptional items to the tune of Rs 88.04 crore. During the current quarter the company commenced commercial production of the 1,50,000 tonnes HSAW
plant. The current order book of the company stands at Rs 8,800 crore. - Important stock data: Market Cap. 1320.9 Crore; Debt (FY08) 1803.1 Crore; Cash (FY08) 120.8 Crore; EV 2942.0 Crore; 52 week H/L 497/67; Equity capital 93.2 Crore; Face value Rs 5; MF Holding (%) 13.6%; FII Holding (%) 15.7%
- Welspun Gujarat is trading at 3.72x FY10E earnings of Rs 19.03. The company has written off the inventories in the last quarter. Its performance is definitely expected to improve in the coming quarters.
- Hence I recommend a Buy call on this stock with a price target of Rs 110 over next 10-12 months time horizon.
