Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Welspun Corp Ltd (BOM:532144, Financial) reported an 8% increase in total pipe volume, reaching 229,000 metric tonnes.
- The company's DI pipe order book remains strong at over 300,000 tonnes, providing clear visibility for the next three quarters.
- Stainless steel volumes rose by 57% year-on-year to 4,700 tonnes.
- EBITDA margins improved due to a better product mix of export orders and contributions from new businesses.
- Welspun Corp Ltd (BOM:532144) achieved a consolidated PAT increase of 50% year-on-year, amounting to INR248 crores.
Negative Points
- The pipe volume saw a slight dip despite the overall increase in total pipe volume.
- There are concerns about potential delays in the US market due to the cyclical nature of project approvals and bidding processes.
- The DI pipe segment, while currently profitable, may see margins normalize to around 13%-15% in the coming years.
- The company faces challenges in integrating and ramping up production for its new acquisitions, such as Weetek Plastics Private Limited.
- There is a need for significant foundational work and market penetration for Sintex BAPL to establish itself as a challenger brand in the plastic pipes market.
Q & A Highlights
Q: On the US business, is there any delay in demand due to government approvals or changes in CapEx economics?
A: Vipul Mathur, CEO: There is no delay due to political elections. The cycle typically takes two quarters after completing a major project. We completed a project in March, and new projects are in the bidding and award stages. The Permian Basin remains strong with significant growth potential.
Q: What is the breakeven volume for profitability in the US?
A: Vipul Mathur, CEO: We aim to close around 300,000 tonnes annually. The US market has immense potential, and we are confident of sustaining 250,000 to 300,000 tonnes of business.
Q: Can you provide demand numbers for DI pipes in FY26 and margin guidance?
A: Vipul Mathur, CEO: The Pan-India demand for DI pipes is around 5 to 6 million tonnes. For Welspun, the addressable market is about 2 million tonnes. Current margins are 16%-18%, but we expect steady-state margins to be around 13%-15%.
Q: What is the contribution of exports in the standalone operations for line pipes?
A: Vipul Mathur, CEO: A significant portion of our profits comes from exports. The product mix changes quarterly, but exports consistently contribute to our earnings.
Q: What is the status of the Sintex acquisition and its impact on the market?
A: Ashish Prasad, CEO of Sintex BAPL: The acquisition of Weetek Plastics will accelerate our entry into the pipe business. We expect to start building the market in six to eight weeks. Sintex aims to be a challenger brand in the plastic pipes industry.
Q: What is the current bid book for line pipes in terms of tonnage?
A: Vipul Mathur, CEO: The active bid book is close to 2 million tonnes, spread across various geographies, including the Middle East and Southeast Asia.
Q: Why not expand CapEx in EPIC given the strong demand in the Middle East?
A: Vipul Mathur, CEO: EPIC is a listed entity with an independent board. We continuously evaluate CapEx and M&A options. Any strategic decision will be taken at the right time.
Q: What is the progress on the DI pipe facility in the Middle East?
A: Vipul Mathur, CEO: We have all requisite approvals and assets. The facility is in the design engineering stage and is expected to be operational in 15 to 18 months.
Q: What is the expected commercialization timeline for the new Sintex capacities?
A: Vipul Mathur, CEO: The CapEx will be commercialized in phases, with the first phase expected by the end of this year. Full benefits will be seen in the next financial year.
Q: What is the expected payback period for the Weetek acquisition?
A: Vipul Mathur, CEO: We expect an ROCE of 18%-20% for any acquisition or investment, including Weetek.
Q: What is the margin profile for different segments in your business?
A: Vipul Mathur, CEO: Oil and gas segments have higher margins, followed by water. Export orders generally have the highest margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
