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Welspun Enterprises Ltd – Long Term Breakout … !!!

Welspun Enterprises Ltd.

The Welspun Group Company is an operating as well as holding company. The main stream of business is Infrastructure. This involves road, water and also urban infrastructure.
Apart from the infrastructure business, the company also has equity holdings in Welspun Natural Resources Private Limited (WNRPL) and Welspun Energy Private Limited.
Welspun Natural Resources Private Limited holds a 35% stake in the Welspun Adani Joint venture


i)Extremely cash rich at Rs 900crores even after capex of Rs200crores for oil and gas rigs development and 300crores for HAM. Company is still left with Rs450crores in the book
ii)Negligible debt at only Rs150crores compared to the cash in hand
iii)Current order book of Rs3000crore which will be executed over next 2years adding to the revenues by FY2019
iv)Sold 15.5% stake in renewable business which helped them raise Rs125crores strengthening their balance sheet position

Valuations and Views

Considering the capex plans and existing investments in the books we have computed the book value of each item for FY2019

i) Cash and equivalents-Rs450crores-Next 2 years (including 125crores from sale of renewable)
ii)Adani welspun JV stake(35% stake)-Rs511crores
iii)Welspun projects(Ham)-Rs484crores
iv)EPC projects=10%*3000crores=Rs300crores
v)Other long term liabilities-29cr
vi)Net current assets-(-140)
vii)Gross debt=Rs150crores
viii)Outstanding shares 14.7crores

BV next year book value is 97.006 and we assign a multiple of 1.5 on FY19(BVPS) and arrive at a target price of  Rs145.

Technical Aspects

Post steep decline from 200 in April 2010 stock continue to decline and registered all time lows of 8 and Nov 2013 and then has been swiftly moving higher. Post forming low stock has been forming progressive higher highs and higher lows in weekly time frame which indicates smart players are entering the stock.
The upside move in price was confirmed with rise in volumes shows entering of the value investors and big players. The decline and rise in price has taken shape of wide rounding pattern which is considered a bullish pattern in nature and shows accumulations done at lower levels. Recent up move has led breakout from said pattern. Breakout was accompanied with rise in volumes and forming long range bull candle shows bulls holding grip. Thus price continue to hold above the same we can expect further higher up moves towards 127 and 160 levels in coming months. Hence this stock should be kept in radar with bullish bias.