Recommendation from Metals & Mining Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

WELSPUN CORP: STRONG POTENTIAL IN THE PIPELINE

HERE IS WHY
✓ Increasing global demand for large-diameter pipes.
✓ Boost from Sintex acquisition.
✓ Ambitious expansion plans in U.S. & Saudi Arabia.

The global demand for oil and gas is projected to rise significantly, with OPEC estimating the oil demand to reach 101.5 million barrels per day by the year 2030 and forecasting 112 million, while the LNG capacity is set to grow by 250 billion cubic metres per year by 2030. Meanwhile, India continues to face growing water shortage, prompting government efforts like the Jal Jeevan Mission to improve water infrastructure and ensure adequate supply across the regions. The common factor among the above is their requirement for large-diameter steel pipes for supply.

Considering this ever-increasing demand for steel pipes, our choice scrip recommendation for this issue is Welspun Corp Limited (WCL). The company is one of the flagship companies of the Welspun Group. WCL is among the top three manufacturers of large-diameter pipes globally. These pipes are used for offshore and onshore transmission of oil, gas and water. WCL also manufactures ductile iron (DI) pipes and stainless steel pipes, tubes and bars. In the building materials vertical, WCL has augmented its portfolio by acquiring Sintex-BAPL, a market leader in water storage tanks and plastic products. WCL also manufactures TMT rebars under the brand name of Welspun Shield, an integral component in the building and infrastructure industry.

In Q3FY25, on a consolidated basis, the company’s revenue decreased by 23.92 per cent YoY to ₹3,613.51 crore compared to ₹4,749.71 crore from the previous year’s same quarter. The revenue decreased due to variations in project execution timelines. On a sequential basis, its revenue increased by 9.44 per cent and stood at ₹3,301.83 crore.

The net profit for the quarter decreased by 5.10 per cent and stood at ₹228.13 crore compared to ₹240.40 crore in the previous year’s same quarter, while sequentially it increased by 8.98 per cent from ₹209.33 crore. WCL reported a strong order book valued at approximately ₹15,000 crore as of Q3FY25, reflecting significant demand across its core business segments. The company has a strong focus on core geographies such as India, the U.S. and Saudi Arabia (KSA). WCL is investing ₹5,508 crore across projects like an HFIW plant in the U.S. (350 KMT, ₹840 crore), and DI and LSAW plants in KSA (600 KMT combined, ₹1,660 crore).

Further, it has planned for plastic pipes expansion via Sintex (200 KMT, ₹2,355 crore), with completions targeted between FY25 and FY28. In the first nine months of FY25, the company spent ₹721 crore in capital expenditure. The market outlook in the U.S. has improved significantly as the current government is focusing on the oil and gas sector. The company’s mill in the U.S. is booked for eight quarters. Saudi Aramco’s oil production capacity expansion is backed by USD 10 billion annual allocation, indicating strong demand for line pipes.

India’s Jal Jeevan Mission (₹67,000 crore allocation), river-linking projects, and a projected 2.5 million tonnes of line pipe demand from oil and gas PSUs over the next two years, alongside global carbon capture and hydrogen pipeline opportunities, ensure sustained demand. The company’s share is currently trading at a PE of 15.4 times, lower than the industry PE of 16.6 times and its three-year median PE of 17.6 times. The PEG ratio also stands at 0.17 times. Considering the company’s business, we recommend BUY.