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Welspun Corp Ltd

| Q3 & 9M FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤2nd Feb 26

Summary : Welspun Corp reported record Q3 FY'26 EBITDA and order book, driven by strong U.S. and Saudi demand, with significant growth prospects from capacity expansions and government infrastructure spending, despite some domestic market tepidness.

Management Perspective positive : Management repeatedly expressed happiness and confidence regarding record order books, strong financial performance, on-track project execution, and significant growth opportunities across all geographies and product segments. Phrases like 'extremely encouraging,' 'very strong bullish scenario,' and 'huge growth potential' were used.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY'26 line pipe sales volumes for India and U.S. reached almost 265,000 tons.
  2. DI pipe sales stood at approximately 92,000 tons, with stainless steel sales at 6,000 tons.
  3. Consolidated global order book hit a record high of INR23,600 crores, ensuring long-term visibility.
  4. Q3 FY'26 EBITDA was INR645 crores, the highest ever quarterly EBITDA with consistent growth.
  5. Annualized Return on Capital Employed (ROCE) stands at more than 24%.

Future Growth Prospects

  1. U.S. market shows significant demand for gas pipelines, driven by LNG exports and data centers, with 8-9 new pipelines discussed.
  2. Saudi Aramco increased capex guidance to $50-55 billion, planning 4,000 km of new pipelines, including Jafurah gas project.
  3. Welspun is expanding its footprint in Saudi with new LSAW and DI pipe greenfield capacities, targeting import substitution.
  4. India's LNG capacity is projected to grow from 52 million tons to 86 million tons, with INR40,000 crores investment in CGD network.
  5. Government's INR70,000 crores allocation to Jal Jeevan Mission (JJM) and AMRUT 2 will boost domestic water and DI pipe demand.

Management Insights

  1. The company achieved its highest-ever quarterly EBITDA and maintains a strong net cash position despite significant capex.
  2. Management is confident in exceeding full-year EBITDA guidance of INR2,200 crores.
  3. Strategic focus is on being a local player in key markets like the U.S. and Saudi Arabia, while also leveraging India for exports to non-tariff markets.
  4. All initiated projects, including new mills in the U.S. and DI plant in Saudi, are on track for completion by Q4 FY'26.
  5. Sustainability is a core focus, with Welspun Corp ranked fifth globally and second in India in the DJSI Index.

Signs of Skepticism

  1. Management did not provide specific revenue guidance for the next financial year, stating it was premature.
  2. The exact financial impact of rising metal prices, specifically coking coal, was not fully detailed beyond stating it's a pass-through.
  3. Specific order book numbers for OPVC pipes were not disclosed, only that orders are contingent on approvals now in place.

Risk Factors

  1. Domestic water sector and India oil & gas market have been tepid in recent quarters due to fund crunch.
  2. Delays in government spending for projects like JJM could impact domestic demand for DI pipes.
  3. Coking coal price increases due to force majeure events could impact margins if not covered by forward contracts or new orders.

Good To Know

  1. Welspun Corp is ranked fifth globally and second in India in the S&P Global Corporate Sustainability Assessment (DJSI Index) for 2025.
  2. The company's sustainability score increased by 7% from the previous year, reflecting strong strategy and execution.
  3. Welspun is expanding its HFIW mill capacity from 20-inch to 24-inch to capture larger NGL transportation market opportunities.
  4. New LSAW mill in the U.S. will make Welspun one of only two players in the American market for heavy wall thickness pipes.
  5. Sintex is steadily regaining market share in water storage tanks and has started executing orders for OPVC pipes.

Key Drivers

  1. U.S. capacity expansion drives volume growth.
  2. Saudi greenfield projects boost international presence.
  3. Government infrastructure spending revives domestic demand.
  4. Record order book ensures long-term revenue visibility.

Key Analyst Discussions

Competitive Environment

  1. Welspun's strategy is to be a local player in tariff markets like the U.S. and Saudi Arabia, avoiding high import duties.
  2. Saudi Arabia has initiated an antidumping duty investigation on cheap imports, which could benefit Welspun's new DI plant.
  3. The new LSAW mill in the U.S. will face only one other major competitor, neutralizing imports in that segment.

Market Trends & Consumer Behavior

  1. Government's INR70,000 crores JJM allocation is expected to revive domestic water projects, with spending anticipated from Q1 next year.
  2. Domestic oil and gas market is expected to improve with moderating LNG prices and planned investments by GAIL and BPCL.
  3. The extension of JJM to 2028 and AMRUT 2 will ensure consistent demand for DI pipes in India.
  4. U.S. demand for pipelines is strong, driven by data centers, LNG export, carbon capture, and hydrogen projects.

Financial Highlights

  1. Management declined to provide product-wise EBITDA figures, suggesting offline discussion.
  2. The company maintains forward coverage for raw materials for at least two quarters, mitigating coking coal price increases.
  3. U.S. operations are expected to achieve 85-90% capacity utilization for the spiral mill in FY'26.
  4. Sintex's revenue for 9 months FY'26 was approximately INR500 crores, with improving market share.

Product Composition

  1. OPVC pipe approvals and accreditations are in place, with order execution expected to build momentum.
  2. Welspun is expanding its HFIW mill to 24-inch to address the sizable 24-inch NGL transportation market.
  3. New LSAW and HFIW mills in the U.S. will significantly add to existing volumes by end of FY'26.
  4. India's line pipe business will focus on exports for oil & gas, while domestic water sector is expected to rebound.

Strategic Considerations

  1. Welspun prioritizes projects based on margin quality and order book visibility, focusing on being a Tier 1 player.
  2. Capital allocation policy emphasizes monitoring inventory, receivables, and creditor payments to improve ROCE.
  3. The company's global order book of INR23,600 crores provides visibility until March 2028 for U.S. and 9-12 months for India oil & gas.
  4. Welspun has not yet evaluated opportunities in Russian refinery reconstruction due to ongoing conflict and government policy.
Welspun Corp Ltd (WELCORP) Concall Report Analysis & Insights | Dhanarthi