Mehabe score: 5 G Factor: 7 Piotski Score: 4 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 7 and Piotski score of 4.
Description
Welspun Enterprises Limited (WEL) , formerly known as Welspun Projects Ltd., is a part of the USD 2.7 billion Welspun Group. The Company operates in the infrastructure space with investments in oil & gas.
Main Points
Asset-Light Model
The Company follows a unique asset-light model, with minimal investment in construction plant and machinery. It only focuses on the high value-add Project Management activity ensuring quality, safety and timely completion of the projects in its portfolio. The entire construction is outsourced/sub-contracted to the best-suited sub-contractor. This outsourcing gives WEL flexibility to take up projects in any part of the country.Site:WELENT
Market Cap:
Rs 1,753 cr
Price:
118.0
Trading pe:
9.8x
Book-value:
108/share
Div yield:
1.70 %
Earning yield:
9.41%
Face-value:
10.0/share
52week high:
135.00
52week low:
54.50
Technical Analysis
Stock trades at 118.0, above its 50dma 111.01. It also trades above its 200dma 95.03. The stock remains bullish on techicals
The 52 week high is at 135.00 and the 52week low is at 54.50
Price Chart
P/E Chart
Sales and Margin
Strengths
– Stock is trading at 1.09 times its book value
– has delivered good profit growth of 24.11% CAGR over last 5 years
– has been maintaining a healthy dividend payout of 25.06%
Weakness
– has a low return on equity of 8.06% for last 3 years.
-Contingent liabilities of Rs.845.85 Cr.
-Earnings include an other income of Rs.162.90 Cr.
Competition
– The industry trades at a mean P/E of 17.6x. Macrotech Devel. trades at the industry’s max P/E of 19.09x. WELENT trades at a P/E of 9.8x
– Industry’s mean G-Factor is 5.2 while the mean Piotski score is 6.0. WELENT has a G-Factor of 7 and Piotski scoreof 4.
– Average 1 month return for industry is 20.0%. The max 1- month return was given by JP Associates: a return of 94.62 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 569.0 cr compared to Rs 471.0 cr for period ended Mar 2020, a rise of 20.8%
Operating Profits reported at Rs 68.0 cr for period ended Mar 2021 vis-vis 65.0 for period ended Mar 2020 .
Operating Margins contracted -185.0 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 2.74 compared to Rs 2.56 for previous quarter ended Dec 2020 and Rs 5.97 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 1530.0 cr for period ended Mar 2021 vis-vis sales of Rs 1808.0 cr for the period ended Mar 2020, a fall of 18.2%. The 3 year sales cagr stood at 12.8%.
Net Profit reported at Rs 129.0 cr for period ended Mar 2021 vis-vis sales of Rs 149.0 cr for the period ended Mar 2020, falling 15.5%.
Company recorded a healthy Net Profit CAGR of 23.2% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities: Rs 0.0 cr for period ended Mar 2021 vis-vis Rs -58.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 10.0% compared to 8.0% over the last 3 Years. – The stock has given a return of 82% on a 1 Year basis vis-vis a return of -15% over the last 3 Years. – The compounded sales growth on a TTM bassis is -31% vis-vis a compounded sales growth of 81% over the last 3 Years. – The compounded profit growth on a TTM basis is 99% vis-vis a compounded profit growth of 137% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 2.07% vis-vis 2.14% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 43.91% vis-vis 43.53% for Dec 2020
Conclusion
– Stock is trading at 1.09 times its book value
– has delivered good profit growth of 24.11% CAGR over last 5 years
– has been maintaining a healthy dividend payout of 25.06% – has a low return on equity of 8.06% for last 3 years.
-Contingent liabilities of Rs.845.85 Cr.
-Earnings include an other income of Rs.162.90 Cr.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 111.01 and is trading at 118.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
