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Welspun Gujarat-Q3FY10 Update

Welspun Gujarat-Q3FY10 Update

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Published by: A_Kinshuk on Jul 22, 2010
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10/25/2012

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Welspun Gujarat Stahl Rohren Ltd has declared its Q3FY10 quarterly results andthe company has clocked a sales of Rs. 1639.5 crore on consolidated basiscompared to 1456.6 crore in the same quarter last year signifying a growth of 13%on YoY basis. The numbers are not comparable with corresponding quarter lastyear as the company added pipe capacity in USA during the year. However, on QoQ basis the company's revenue has dropped by 16.28% on considering thestandalone figure. On a standalone basis, the company reported an EBITDA andPAT of Rs.346.8 crore and Rs.166.8 crore respectively in the quarter under reviewcompared to Rs.142.9 crore and Rs.45.3 crore in the corresponding quarter lastyear. This signifies an increase of 144% on EBITDA level and 268% on PAT level onYoY basis.The company has been able to improve its EBITDA (21%), EBIT (18%), and PAT(10%) margin significantly in the quarter under review. Excluding the forexrecovery included in other income of about Rs. 60 crore, the margins would be18%, 14% and 7% respectively. This improvement in the profitability can beattributed to factors like:1.commissioning of the plate cum coil mill which is enabling the company toenhance its external sales in both API and non API categories and hencecontributing to its bottomline2.commissioning of double jointing and coating facilities in Arkansas USA, whichis doing the coating and jointing jobs of the bare pipes which were previouslydone by other players previously3.replacement of high cost debt with low cost debt and QIP money.
Result at a glance on Consolidated Basis as reported by the company.
RESEARCH
EUREKA RESEARCH
www.eurekasecurities.com
27 JANUARY, 2010QUARTERLY UPDATE
 Welspun Gujarat Stahl Rohren Ltd.
ANALYST
Kinshuk Acharyakinshuk@eurekasecurities.com
91-33-3918 0386 - 87
COMPANY DETAILSSHAREHOLDING PATTERN
BSE CodeNSE SYMBOLBloomberg codeMarket cap(Rs crore)Free Float(%)52-wk H/L(Rs)Dividend yield-%Beta(Nifty)PromoterFIIOther InstitutionsOthers532144WELGUJWGS IN521960%296/482.01%1.2540.46%19.07%13.82%26.65%
 Accumulate on dips
CMP : Rs. 256.00RECOMMENDATION
ParticularsSalesEBITDAEBITDA MarginDepreciationEBITEBIT MarginInterestEBTEBT MarginPATPAT MarginQ3FY10
1639.5348.621%51.1297.518%42.8254.716%166.810%
Q3FY09
1456.6142.910%31.6111.38%4863.34%45.33%
 
Operational Highlights
During the quarter under review, the company's sales and production is as followsOut of total pipe sales of ~170216 tons, ~5000 tons is contributed by LSAW pipes, ~ 148000 tons of HSAW and ~17000 tons of ERW pipes.The company, on the other hand, produced 26000 tons of LSAW, 112000 tons of HSAW and 19000 tons to ERW pipes. On quarterly basisthe company's capacity utilization has been around 30% for LSAW, 50% for HSAW and again 30% on ERW pipe segment respectively. Platedivision's utilization rate has been 24%, however, this division has newly been operational and we expect the utilization rate to go upsignificantly in FY11.The company's order book position stands at Rs. 6600 crores, the breakup of the same is presented in the following chart:In terms of value, HSAW pipe order book stands at Rs. 5000 crore, LSAW at Rs. 900 crore, ERW at Rs. 160 crore, Rs. 100 crore in externalplate, Rs. 500 crore for coating.In terms of volume, the current order book of Rs. 6600 crore constitutes of 7,60,000 tons of pipes and 1,00,000 tons of plates.
Sales Volume (in tons)Total Pipe (Cons)Plate ExternalPlate internalTotal plateProduction Volume (in tons)Total Pipes ConsolidatedPlatesQ3FY10
170216103151917811232915667993586
Q3FY09
15514413110312804439017998056796
YoY%
10%687%153%65%-71%-13%
EUREKA RESEARCH2
 Welspun Gujarat Stahl Rohren Ltd.
27 JANUARY, 2010
www.eurekasecurities.com
Source: Company Source: Company Source: Company 
HSAW75%ERW2%ExternalPlates1%Coating8%LSW14%
Order Book Composition
HSAW, 640000ERW, 25000ExternalPlates, 40000
Coating, 60000
LSW, 100000
Order Book Composition (in tons)
 
In terms of geographical distribution of the order book position, 78% of the order book is from North America, rest is from India, MiddleEast, etc.The breakup of the consolidated EBITDA is as followsDuring the quarter under review the company's EBITDA per ton of pipes stood at Rs. 11500 and the same for the plates stood at Rs. 6,500per ton.As it has been depicted in the graph above the company has recorded a forex recovery of Rs. 60 crore, which has been included in the'other income'.For the quarter under review the production and sales volume of US operations stood at 33000 tons and 31000 tons respectively. For thenine months under review the production and sales volume of US operations stood at 82000 tons and 83000 tons respectively.Slab inventory has come down significantly from 80000 tons to 28000 tons in the quarter under review. There has been 62000 tones of unsold finished goods inventory out of HSAW comprised of 45,000 tons could not be shipped in the quarter under review and as such itwill be sold in the current quarter.The company has reported lower interest cost because it has prepaid approx. Rs 500 crore high cost debt during the quarter. Presently,the cost of debt including the forex premium comes to 8.5% and excluding forex premium on weighted basis it is 5.16%. Its total debt atthe end of December 31st 2009 stood at Rs. 2300 crore out of which Rs. 1400 crore pertains to foreign loan (ECB and FCCB) and Rs. 900crore of domestic loanHigher depreciation with respect to Q3 FY10 due to commissioning of 150K MT Spiral III Plant in Anjar and 350K MT Spiral Plant in USCash balance on 31st December stood at Rs. 1300 crore, which also includes some part of the proceeds of QIP and FCCBOn YoY basis the sales volume have gone up, however on QoQ basis the sales volume has been considerably lower. This is attributable tothe fact that a significant amount of shipment that was supposed to be made during the last quarter could not be made, mainly becauseof the holiday seasons where most of the liners do not operate. However, these consignments have already been shipped and therevenue will be recognized in the 4th quarter. In addition to this the production volume has also been on the lower side on account of LSAW mill was shut down for 2 weeks for planned maintenance.The management has been optimistic about Q4FY10 and FY11 as a significant amount of order flows are expected to take place both fromthe domestic and international front. It is expected that crude oil would continue to remain stable in $75-80 range and as such enhancedactivities in the oil and gas exploration front is becoming visible all over the world and especially in the US. This is evident from theimproving trend of rig counts all over the world and in the US. With the plant in US expected to be fully operational by the next fiscal, thecompany is expecting good order in the US based plant from the region. The management has indicated that inquiries from Iran, Middle
Concall Highlight
EUREKA RESEARCH3
 Welspun Gujarat Stahl Rohren Ltd.
27 JANUARY, 2010
www.eurekasecurities.com
Source: Company 
Pipe19656%Plate7321%Coating206%Forex Recovery6017%
EBITDA Contribution (In Rs. Cr)

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