Description
This is a presentation highlights fundamental analysis, valuation, technical analysis, competition analysis of Welspun India.
WELSPUN GUJARAT ROHREN STAHL LTD
FLOW OF PRESENTATION
FUNDAMENTAL ANALYSIS VALUATION MODEL TECHNICAL ANALYSIS COMPETITION ANALYSIS
FUNDAMENTAL ANALYSIS
INDUSTRY ANALYSIS: GLOBAL SCENARIO
?
Marketplace – Oil and Gas sector (50%), Building and Construction (30%), etc. More than 500 projects announced worldwide - 75 million tonnes of different grades of pipes
?
?
Over 1 million miles of Oil and Gas pipeline has outlived its economic life – Replacement market
?
INDUSTRY ANALYSIS: INDIAN SCENARIO
?
Oil and Gas transportation through pipelines in India – 32% coverage as against over 70% average worldwide 1846 km of pipelines is under construction Gas pipelines originating from KG Basin 2718 km of crude oil pipelines are proposed for construction Transnational pipelines: IPI, TAPI and MBI
?
?
?
?
CLASSIFICATION OF PIPES
HSAW Steel Coils Steel Plates Billets Steel Sheets Pig Iron
SAW LSAW
Pipes Seamless ERW DVCI
GROWTH DRIVERS FOR WSGRL
Strong Order Book – Rs. 53 billion
• Executable within next 2 years • Earnings sustainability and profitability
Backward Integration
• 1.5 MT Plate cum Coil mill at Anjar – FY09 • EBITDA margins would rise by 40% in 2 years
GROWTH DRIVERS
HSAW Plant in USA
• 0.3 million tonnes – fully operational in FY09
• Reduce transportation costs and boosts margins
International Accreditations
• 44 accreditation from international O&G companies • Approval from BP, Chevron, Saudi Aramco
Capacity Additions and Better Utilization
• HSAW – 0.15 MT, LSAW – 0.3 MT by FY09 - 10
VALUATION MODEL
CALCULATION OF BETA
Beta 1 yr 2 yr 3 yr 1.06 1.01 0.92
Adj Beta 1.04 1.01 0.95
CALCULATION OF WACC
Cost of Equity High Growth Stable growth
Risk free rate (Rf)
BETA Current Beta Unlevered Beta Levered Beta Debt Equity Ratio 2008 2007 2006 Average for 3 years 2.342 1.622 1.314 1.759 Marginal Tax Rate After tax cost of debt Industry D/E ratio 1.65 MV of equity MV of debt We Wd Cost of capital Cost of debt 0.949 0.439 1.118 Risk premium (Rm-Rf) Levered beta Cost of equity (Ke) Cost of Debt Interest charges Total loan
7.68%
8.50% 1.118 17.18% 0.917 15.48%
708.06 7649.83 9.26% 33.99% 6.11% 25876.05 14346.23 64.33% 35.67% 13.23% 55.00% 45.00% 11.18% 5.94% 9.00%
REINVESTMENT RATE AND GROWTH RATE
Reinvestment 2000 2001 2002 2003 2004 2005 2006 2007 2008
Change in net block Change in capital WIP -11.07 2539.18 162.33 133.35 -2455 -18.46 -158.95 38.35 -121.77 1313.62 2515.46 744.34 -11.87 1263.65 2246.03 5591.14 12722.54 -4963.99
Change in non cash CA Change in non cash CL Change in non cash WC
246.3
662.12 -109.16
22.97 60.22 -37.25
941.46 4838.71 2488.29 3174.19 1014.6 6110.33 1371.86 1402.01 -73.14 -1271.62 1116.43 1772.18
10689.27 6832.86 3856.41
216.13 335.58 -186.15 30.17 326.54 76.99
Total reinvestment
152.45 410.72 220.86
-157.85
-206.78 1305.65 5877.92 8107.66
11614.96
EBIT EBIT EBIT(1-t) AM of reinvestment rate (Last 6 years) 45.94 339.94 435.73 375.5 247.86755 1387.42 704.69 1322.39 2899.14 915.836 465.1659 872.91 1913.72 260.73%
TTM 6447.00 4255.66
30.325 224.394 287.625
Reinvestment rate Avg ROC (Last 6 years)
ROC Growth Rate
502.72%
183.03 76.79% %
-63.68%
-22.58% 280.68% 18.21%
673.37 423.66 % %
272.93%
1.38%
9.33% 10.97%
9.07%
34.66% 13.32% 13.35% 16.70% 47.49%
22.19%
INPUTS FOR VALUATION
Inputs
High growth period
Moderate growth period
Stable growth period
Reinvestment rate Return on capital Expected growth rate
260.73% 18.21% 47.49%
109.95% 14.70% 16.16%
49.17% 11.18% 5.50%
Beta D/E ratio Cost of capital
1.12 2.34 13.23%
1.02 2.00 12.21%
0.92 1.65 11.18%
Cost of equity
After tax Cost of debt
17.18%
6.11%
16.33%
6.03%
15.48%
5.94%
Tax rate
33.99%
33.99%
33.99%
ESTIMATES
Growth Phase Year TTM 2009 First stage of high growth = 47% 2010 2011 2012 2013 2014 2015 2016 2017 Moderate growth period = 16% 2018 2019 2020 2021 2022 2023 Stable growth period 2024 onwards 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 EBIT(1-t) 4255.66 6276.52 9256.99 13652.8 20136 29697.8 34497.2 40072.2 46548.3 54070.9 62809.2 72959.7 84750.7 98447.1 114357 132838 140144 Reinvestment 11095.81486 16364.79241 24135.80562 35596.97541 52500.61581 77431.1477 37928.76859 44058.39013 51178.61225 59449.5247 69057.08911 80217.32017 93181.14241 108240.032 125732.5701 146052.0558 68914.79502 FCFF -6840.2 -10088 -14879 -21944 -32365 -47733 -3431.6 -3986.1 -4630.3 -5378.6 -6247.9 -7257.6 -8430.5 -9792.9 -11376 -13214 71229.4 Present value -6840.15 -8909.43 -11604.7 -15115.4 -19688 -25644 -1719.29 -1779.85 -1842.55 -1907.46 -1974.65 -2044.22 -2116.23 -2190.78 -2267.95 -2347.85 194286.8
FAIR VALUE BY DCF METHOD
Fair Value 385.63
Sum of PV Value of debt Value of cash
86294.215 18031.00 3447.21
Value of Equity
No of shares
71710.425
185956044
SENSITIVITY ANALYSIS
Scenario Summary
Current Values Scenario Scenario Scenario Scenario Scenario Scenario Scenario Scenario 1 2 3 4 5 6 7 8
Changing Cells:
Terminal Growth Rate WACC 5.50% 13.23% 6.00% 13.23% 5.00% 13.23% 5.50% 13.73% 5.50% 12.73% 6.00% 13.73% 6.00% 12.73% 5.00% 13.73% 5.00% 12.73%
Result Cells:
Fair Vlaue 385.63 398.09 373.07 328.07 447.87 337.36 476.78 318.63 431.89
RELATIVE VALUATION
Company Name Bihar Tubes Ltd. Good Luck Steel Tubes Ltd. Jindal Saw Ltd. Indian Seamless Metal Tubes (Kalyani Seamless Tubes) Ltd. Lloyds Metals & Engineers Ltd. Maharashtra Seamless Ltd. P S L Ltd. Rajasthan Tube Mfg. Co. Ltd. Suraj Stainless Ltd. Welspun-Gujarat Stahl Rohren Ltd. Valuation Mean Multiples Fair value of Welspun Gujarat Stahl Rohren Ltd 15.32 290.22 3.99 353.26 Closing Price 178.75 399.05 575.25 86.70 32.20 272.65 219.25 13.00 137.45 250.55 P/E 16.88 15.94 9.24 18.37 20.77 9.50 10.48 12.75 26.08 13.23 P/B 3.34 3.58 1.43 1.98 15.94 1.67 1.58 2.80 4.79 2.83 EPS 10.59 25.03 62.26 4.72 1.55 28.71 20.93 1.02 5.27 18.94 BV per Share 53.56 111.34 401.76 43.84 2.02 163.57 138.55 4.65 28.67 88.44
VALUATION SUMMARY: TARGET PRICE
Valuation Method DCF P/E ratio P/BV ratio Share value 385.63 290.22 353.26 Weigtage 70% 15% 15%
Target Price
366.46
RISKS TO VALUATION
?
Slowdown in Demand
?
Execution Delays
Availability and Cost of Input Competition
?
?
TECHNICAL ANALYSIS
CANDLE GRAPH
3 YEAR RSI CHART
3 YEAR MFI CHART
Price
MFI
1 YEAR BOLLINGER BANDS
600 560 520 480 440
400
360 320 280 240 200 160 120 80 40 0 10/2007
11/2007
12/2007
01/2008
02/2008 20 days MA
03/2008
04/2008
05/2008 Lower Band
06/2008
07/2008
08/2008
09/2008
10/2008
Upper Band
Price
3 YEAR BOLLINGER BANDS
600 560 520 480 440 400 360 320 280 240 200
160
120 80 40 0
20 days MA
Upper Band
Lower Band
Price
COMPETITOR ANALYSIS
CAPACITIES (FY08)
Capacities (MTPA) FY08 Particulars Jindal Saw WGRSL PSL Man Indus. Total
LSAW
HSAW Seamless Pipes Ductile Iron ERW
800,000
150,000 100,000 200,000 -
350,000
400,000 -
1,100,000 -
275,000
150,000 -
1,425,000
1,800,000 100,000 200,000
250,000
-
-
250,000
Total
1,250,000
1,000,000
1,100,000
425,000
375,000
CAPACITIES (FY10)
Capacities Post Expansion (MTPA) FY10 Particular LSAW HSAW Seamless Pipes Ductile Iron ERW Total Jindal Saw 1,000,000 500,000 250,000 200,000 1,950,000 WGRSL 650,000 850,000 250,000 1,750,000 PSL 1,400,000 1,100,000 Man Indus. 500,000 800,000 425,000 Total 2,150,000 3,550,000 100,000 200,000 250,000 375,000
THANK YOU!!!
doc_661730103.pptx
This is a presentation highlights fundamental analysis, valuation, technical analysis, competition analysis of Welspun India.
WELSPUN GUJARAT ROHREN STAHL LTD
FLOW OF PRESENTATION
FUNDAMENTAL ANALYSIS VALUATION MODEL TECHNICAL ANALYSIS COMPETITION ANALYSIS
FUNDAMENTAL ANALYSIS
INDUSTRY ANALYSIS: GLOBAL SCENARIO
?
Marketplace – Oil and Gas sector (50%), Building and Construction (30%), etc. More than 500 projects announced worldwide - 75 million tonnes of different grades of pipes
?
?
Over 1 million miles of Oil and Gas pipeline has outlived its economic life – Replacement market
?
INDUSTRY ANALYSIS: INDIAN SCENARIO
?
Oil and Gas transportation through pipelines in India – 32% coverage as against over 70% average worldwide 1846 km of pipelines is under construction Gas pipelines originating from KG Basin 2718 km of crude oil pipelines are proposed for construction Transnational pipelines: IPI, TAPI and MBI
?
?
?
?
CLASSIFICATION OF PIPES
HSAW Steel Coils Steel Plates Billets Steel Sheets Pig Iron
SAW LSAW
Pipes Seamless ERW DVCI
GROWTH DRIVERS FOR WSGRL
Strong Order Book – Rs. 53 billion
• Executable within next 2 years • Earnings sustainability and profitability
Backward Integration
• 1.5 MT Plate cum Coil mill at Anjar – FY09 • EBITDA margins would rise by 40% in 2 years
GROWTH DRIVERS
HSAW Plant in USA
• 0.3 million tonnes – fully operational in FY09
• Reduce transportation costs and boosts margins
International Accreditations
• 44 accreditation from international O&G companies • Approval from BP, Chevron, Saudi Aramco
Capacity Additions and Better Utilization
• HSAW – 0.15 MT, LSAW – 0.3 MT by FY09 - 10
VALUATION MODEL
CALCULATION OF BETA
Beta 1 yr 2 yr 3 yr 1.06 1.01 0.92
Adj Beta 1.04 1.01 0.95
CALCULATION OF WACC
Cost of Equity High Growth Stable growth
Risk free rate (Rf)
BETA Current Beta Unlevered Beta Levered Beta Debt Equity Ratio 2008 2007 2006 Average for 3 years 2.342 1.622 1.314 1.759 Marginal Tax Rate After tax cost of debt Industry D/E ratio 1.65 MV of equity MV of debt We Wd Cost of capital Cost of debt 0.949 0.439 1.118 Risk premium (Rm-Rf) Levered beta Cost of equity (Ke) Cost of Debt Interest charges Total loan
7.68%
8.50% 1.118 17.18% 0.917 15.48%
708.06 7649.83 9.26% 33.99% 6.11% 25876.05 14346.23 64.33% 35.67% 13.23% 55.00% 45.00% 11.18% 5.94% 9.00%
REINVESTMENT RATE AND GROWTH RATE
Reinvestment 2000 2001 2002 2003 2004 2005 2006 2007 2008
Change in net block Change in capital WIP -11.07 2539.18 162.33 133.35 -2455 -18.46 -158.95 38.35 -121.77 1313.62 2515.46 744.34 -11.87 1263.65 2246.03 5591.14 12722.54 -4963.99
Change in non cash CA Change in non cash CL Change in non cash WC
246.3
662.12 -109.16
22.97 60.22 -37.25
941.46 4838.71 2488.29 3174.19 1014.6 6110.33 1371.86 1402.01 -73.14 -1271.62 1116.43 1772.18
10689.27 6832.86 3856.41
216.13 335.58 -186.15 30.17 326.54 76.99
Total reinvestment
152.45 410.72 220.86
-157.85
-206.78 1305.65 5877.92 8107.66
11614.96
EBIT EBIT EBIT(1-t) AM of reinvestment rate (Last 6 years) 45.94 339.94 435.73 375.5 247.86755 1387.42 704.69 1322.39 2899.14 915.836 465.1659 872.91 1913.72 260.73%
TTM 6447.00 4255.66
30.325 224.394 287.625
Reinvestment rate Avg ROC (Last 6 years)
ROC Growth Rate
502.72%
183.03 76.79% %
-63.68%
-22.58% 280.68% 18.21%
673.37 423.66 % %
272.93%
1.38%
9.33% 10.97%
9.07%
34.66% 13.32% 13.35% 16.70% 47.49%
22.19%
INPUTS FOR VALUATION
Inputs
High growth period
Moderate growth period
Stable growth period
Reinvestment rate Return on capital Expected growth rate
260.73% 18.21% 47.49%
109.95% 14.70% 16.16%
49.17% 11.18% 5.50%
Beta D/E ratio Cost of capital
1.12 2.34 13.23%
1.02 2.00 12.21%
0.92 1.65 11.18%
Cost of equity
After tax Cost of debt
17.18%
6.11%
16.33%
6.03%
15.48%
5.94%
Tax rate
33.99%
33.99%
33.99%
ESTIMATES
Growth Phase Year TTM 2009 First stage of high growth = 47% 2010 2011 2012 2013 2014 2015 2016 2017 Moderate growth period = 16% 2018 2019 2020 2021 2022 2023 Stable growth period 2024 onwards 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 EBIT(1-t) 4255.66 6276.52 9256.99 13652.8 20136 29697.8 34497.2 40072.2 46548.3 54070.9 62809.2 72959.7 84750.7 98447.1 114357 132838 140144 Reinvestment 11095.81486 16364.79241 24135.80562 35596.97541 52500.61581 77431.1477 37928.76859 44058.39013 51178.61225 59449.5247 69057.08911 80217.32017 93181.14241 108240.032 125732.5701 146052.0558 68914.79502 FCFF -6840.2 -10088 -14879 -21944 -32365 -47733 -3431.6 -3986.1 -4630.3 -5378.6 -6247.9 -7257.6 -8430.5 -9792.9 -11376 -13214 71229.4 Present value -6840.15 -8909.43 -11604.7 -15115.4 -19688 -25644 -1719.29 -1779.85 -1842.55 -1907.46 -1974.65 -2044.22 -2116.23 -2190.78 -2267.95 -2347.85 194286.8
FAIR VALUE BY DCF METHOD
Fair Value 385.63
Sum of PV Value of debt Value of cash
86294.215 18031.00 3447.21
Value of Equity
No of shares
71710.425
185956044
SENSITIVITY ANALYSIS
Scenario Summary
Current Values Scenario Scenario Scenario Scenario Scenario Scenario Scenario Scenario 1 2 3 4 5 6 7 8
Changing Cells:
Terminal Growth Rate WACC 5.50% 13.23% 6.00% 13.23% 5.00% 13.23% 5.50% 13.73% 5.50% 12.73% 6.00% 13.73% 6.00% 12.73% 5.00% 13.73% 5.00% 12.73%
Result Cells:
Fair Vlaue 385.63 398.09 373.07 328.07 447.87 337.36 476.78 318.63 431.89
RELATIVE VALUATION
Company Name Bihar Tubes Ltd. Good Luck Steel Tubes Ltd. Jindal Saw Ltd. Indian Seamless Metal Tubes (Kalyani Seamless Tubes) Ltd. Lloyds Metals & Engineers Ltd. Maharashtra Seamless Ltd. P S L Ltd. Rajasthan Tube Mfg. Co. Ltd. Suraj Stainless Ltd. Welspun-Gujarat Stahl Rohren Ltd. Valuation Mean Multiples Fair value of Welspun Gujarat Stahl Rohren Ltd 15.32 290.22 3.99 353.26 Closing Price 178.75 399.05 575.25 86.70 32.20 272.65 219.25 13.00 137.45 250.55 P/E 16.88 15.94 9.24 18.37 20.77 9.50 10.48 12.75 26.08 13.23 P/B 3.34 3.58 1.43 1.98 15.94 1.67 1.58 2.80 4.79 2.83 EPS 10.59 25.03 62.26 4.72 1.55 28.71 20.93 1.02 5.27 18.94 BV per Share 53.56 111.34 401.76 43.84 2.02 163.57 138.55 4.65 28.67 88.44
VALUATION SUMMARY: TARGET PRICE
Valuation Method DCF P/E ratio P/BV ratio Share value 385.63 290.22 353.26 Weigtage 70% 15% 15%
Target Price
366.46
RISKS TO VALUATION
?
Slowdown in Demand
?
Execution Delays
Availability and Cost of Input Competition
?
?
TECHNICAL ANALYSIS
CANDLE GRAPH
3 YEAR RSI CHART
3 YEAR MFI CHART
Price
MFI
1 YEAR BOLLINGER BANDS
600 560 520 480 440
400
360 320 280 240 200 160 120 80 40 0 10/2007
11/2007
12/2007
01/2008
02/2008 20 days MA
03/2008
04/2008
05/2008 Lower Band
06/2008
07/2008
08/2008
09/2008
10/2008
Upper Band
Price
3 YEAR BOLLINGER BANDS
600 560 520 480 440 400 360 320 280 240 200
160
120 80 40 0
20 days MA
Upper Band
Lower Band
Price
COMPETITOR ANALYSIS
CAPACITIES (FY08)
Capacities (MTPA) FY08 Particulars Jindal Saw WGRSL PSL Man Indus. Total
LSAW
HSAW Seamless Pipes Ductile Iron ERW
800,000
150,000 100,000 200,000 -
350,000
400,000 -
1,100,000 -
275,000
150,000 -
1,425,000
1,800,000 100,000 200,000
250,000
-
-
250,000
Total
1,250,000
1,000,000
1,100,000
425,000
375,000
CAPACITIES (FY10)
Capacities Post Expansion (MTPA) FY10 Particular LSAW HSAW Seamless Pipes Ductile Iron ERW Total Jindal Saw 1,000,000 500,000 250,000 200,000 1,950,000 WGRSL 650,000 850,000 250,000 1,750,000 PSL 1,400,000 1,100,000 Man Indus. 500,000 800,000 425,000 Total 2,150,000 3,550,000 100,000 200,000 250,000 375,000
THANK YOU!!!
doc_661730103.pptx