Release Date: May 31, 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) recorded the highest-ever revenue and EBITDA for FY24, with revenue increasing by 74% year-on-year to INR 17,500 crore and EBITDA doubling to INR 1,800 crore.
- The company achieved a significant reduction in net debt, bringing it down to INR 387 crore at the end of FY24 from INR 1,138 crore in FY23.
- Welspun Corp Ltd (BOM:532144) saw strong volume growth across all business segments, including line pipes, DI pipes, stainless steel bars, and building materials.
- The company has a robust order book, particularly in the US and Saudi markets, ensuring business continuity for the next four to six quarters.
- Welspun Corp Ltd (BOM:532144) has been ranked in the top 5 percentile in the DJSI ESG rating, reflecting its commitment to sustainability and corporate governance.
Negative Points
- Despite the strong performance, the guidance for FY25 is almost flat compared to FY24, raising concerns about growth momentum.
- The company faces potential competition from OPVC pipes, which could interfere with the DI pipes market, particularly in smaller diameters.
- There are concerns about the efficiency and adequacy of local DI pipe manufacturing capacities in Saudi Arabia, which could impact future import opportunities.
- The company is undertaking significant CapEx investments, which could strain the balance sheet if not managed prudently.
- Gross margins have come down, partly due to the fall in steel prices and the blend of products sold, indicating potential volatility in profitability.
Q & A Highlights
Q: The outlook you shared is very strong and positive. Just curious, why is the guidance for FY25 almost flat to down versus FY24?
A: In FY24, we took a quantum leap from INR10,000 crore to INR17,000 crore in turnover and from INR800 crore to INR1,800 crore in EBITDA. We want to ensure a smooth ramp-up in the curve and provide guidance based on current fundamentals. As we progress through the year, more clarity will emerge, and we may revise the guidance upward if necessary.
Q: Can we infer that our annual DI pipe volumes will be upwards of 400,000 tonnes based on the current order book?
A: We have a capacity of 400,000 tonnes, expanding to 600,000 tonnes by the end of the year. With an order book of 328,000 tonnes and strong demand, we aim for 70-80% capacity utilization. While I won't commit to a specific number, we are optimistic about achieving close to the suggested volumes.
Q: What is the expected EBITDA per tonne for Saudi operations in FY25?
A: Our guidance for Saudi operations remains at $200 per tonne. While project mix and market conditions can influence this, we have a confirmed order book for over two years and stable steel prices, giving us confidence in maintaining or exceeding this EBITDA level.
Q: How much CapEx are you planning for FY25 and FY26, and what is the split of the INR2,350 crore CapEx for Sintex?
A: We have announced CapEx for Sintex (INR2,300 crore), DI expansion in India, and DI expansion in the Middle East. The DI expansion in India will be completed this year, while the Middle East and Sintex CapEx will be spread over two years. We expect to spend between INR1,500 crore to INR2,000 crore in FY25.
Q: Can you clarify the impact of OPVC pipes on DI pipes for water supply?
A: OPVC pipes are primarily for small diameters (60mm to 300mm) and may influence DI pipes in certain sizes over time. However, they will not completely replace DI pipes, especially in larger diameters and varied terrains. Any significant impact is at least two to three years away.
Q: What is the current status and future outlook for Sintex's growth and market share?
A: Sintex had a market share of over 20% at its peak, which dropped to 9-10% during CIRP. We are focusing on strengthening our go-to-market strategy and reenergizing channel partners to recoup market share. We expect significant growth in FY25 and beyond.
Q: What is the current capacity utilization for Sintex, and what are the plans for the plastic pipes business?
A: Sintex's current capacity utilization is around 40%. We are investing in the plastic pipes business, with operations expected to start in the first quarter of FY26. The focus is on driving profitable growth and premiumizing the market.
Q: What is the current order book for the US market in volume terms?
A: We have an order book of approximately 80,000 to 100,000 tonnes, which will take us through to the third quarter of this financial year.
Q: Can you provide a breakdown of sales volumes between India and the USA for Q4?
A: For Q4, we had close to 300,000 tonnes in sales volumes, with approximately 20% from the USA and the balance from India.
Q: What are your views on the OCTG pipe activities in India?
A: OCTG pipes are not part of our product portfolio, so it would be inappropriate for us to comment on that.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
