Shares of Welspun Corp fell nearly 2 percent in intraday trade on BSE on April 10 and looked on course to snap the winning streak of the last five consecutive sessions.
The stock opened at ₹218.05 against the previous close of ₹217.85 and fell 1.8 percent to ₹214 in trade.
The stock hit its 52-week high of ₹298.35 on September 22, 2022, and as of the close of the previous session on April 6, it is down 28.27 percent on BSE.
However, the stock's performance has improved since March this year. Since March, it has gained over 18 percent.
Analysts are positive about the stock and they find it an attractive bet for the short and medium term as it looks sound on both fundamental and technical parameters.
Abhijeet Bora, DVP Research Analyst at Sharekhan by BNP Paribas, has a ‘buy’ call on the stock with a target price of ₹274.
Bora highlighted that a robust order pipeline of 928 kt or ₹13,200 crore (executable over nine months) and focus on the ramp-up of recently commissioned DI pipes and TMT bars capacity along with sustained turnaround of speciality steel would drive strong PAT CAGR of 25 percent over FY22-25E and improvement in RoCE (return on capital employed) to 17 percent versus 12 percent in FY22.
Bora believes the ABG Shipyard deal (value accretive given metal scrap value of ₹600-700 crore) offers an opportunity to enter shipbuilding while the Sintex acquisition would help expand the product portfolio (plastic) and augurs well for B2C business.
"Welspun Corp has envisaged medium-term revenue, EBITDA and RoCE targets of ₹15,000 crore, ₹1,600-1,800 crore and 18 percent, respectively, over the next three-five years, which implies two times growth in revenue, three-four times growth in EBITDA and a nearly 580bps growth in RoCE over FY22," said Bora.
"A valuation of 6.5 times and 4.4 times FY25E PE and EV/EBITDA are attractive and offer room for re-rating given the company’s focus to build on new businesses with a high margin," added Bora.
On the technical front, Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, underscored the stock has been making a lower top lower bottom structure since it made a 52-week high of ₹298.35 on September 22, 2022.
At the current juncture, Patel said the stock has changed its price structure by taking out its previous swing high of ₹215 accompanied by a trendline violation (refer to the chart below).
The analysts said on the indicator front, the daily MACD has given a bullish cross exactly near the zero-line which hints toward a bullish stance for the coming few weeks. Additionally, 12 and 26 simple moving averages also gave the bullish cross (the angle of the bullish cross is facing the upside) in tandem with the daily MACD which is looking lucrative.
"We advise to go long in this counter in the range of ₹215-219 with an upside target of ₹245 and a stop loss would be ₹199 on a daily close basis," said Patel.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
