Welspun Corp shares jump 6% after Jefferies initiates coverage with Buy rating. Should you invest?

Welspun Corp shares jumped nearly 6% during Thursday's trading session after Jefferies initiated coverage with a Buy rating and a price target of Rs 3,250, citing a multi-year upcycle in energy and water infrastructure spending in the US and Saudi Arabia.

The target implies a potential upside of 27% from the brokerage's reference price of Rs 2,553.45. Jefferies valued the stock at 17 times its estimated September 2028 enterprise value-to-EBITDA.

At 9:26 am, Welspun Corp was trading at Rs 2,669.70 on the National Stock Exchange (NSE), up Rs 146.20, or 5.79%. The stock opened at Rs 2,554.70 against its previous close of Rs 2,523.50, while its volume-weighted average price stood at Rs 2,612.52.


Welspun Corp has rallied 51.51% over the past month, outperforming the benchmark’s 2.80% gain. The counter recorded a traded value of Rs 411.36 crore, while its free-float market capitalisation stood at Rs 33,944 crore.

Jefferies said Welspun, the world's largest welded line-pipe manufacturer, is well placed to benefit from rising energy and water infrastructure spending in the US and Saudi Arabia, adding that its local manufacturing presence in both markets, capacity expansion, and robust order book provide strong earnings visibility.

US energy infrastructure upcycle

Jefferies expects US energy infrastructure investment to enter a multi-year expansion phase, driven by increasing liquefied natural gas exports, rising electricity demand from data centres and higher associated gas production from the Permian Basin.

Bloomberg estimates cited in the report peg cumulative US midstream capital expenditure at around $240 billion during 2026-30, up 57% from the preceding five years. Jefferies also believes spending estimates could be revised upwards as several proposed pipeline projects have yet to receive final approval.

Welspun holds an estimated 30% share of the US large-diameter line-pipe market. Its domestic manufacturing presence gives it an advantage over import-dependent suppliers by limiting exposure to trade barriers, reducing delivery times and improving eligibility for projects that prioritise locally manufactured products.

The company is more than doubling its US line-pipe capacity (from 5.25 lakh tonnes per annum to nearly 11.75 lakh tonnes by FY27) to capitalise on the expected increase in pipeline construction.

Saudi Arabia expansion and India opportunity

Saudi Arabia offers a major growth opportunity as it expands energy and water infrastructure under Vision 2030. Welspun owns 22% of East Pipes Integrated Company and is building six lakh tonnes of annual capacity through a wholly owned subsidiary. Jefferies expects localisation requirements and Saudi Aramco’s planned 80% increase in gas-production capacity by 2030 to support demand.

Meanwhile, India also presents a sizeable long-term opportunity across oil and gas, drinking water, irrigation and river-linking projects, with more than 25,000 kilometres of gas pipelines commissioned and over 10,000 kilometres under construction. However, Jefferies said near-term visibility remains uncertain because delayed project awards, funding constraints and excess ductile-iron pipe capacity have weighed on domestic demand, while greater competition has kept margins below those in the US.

Growth projections

Jefferies expects Welspun's total pipe-manufacturing capacity to increase 51% to 37 lakh tonnes per annum by FY27, from 24 lakh tonnes in FY26. The expansion is projected to support a 17% compound annual growth rate in volumes between FY26 and FY29.

The brokerage expects EBITDA to grow at a CAGR of 32%, while earnings per share are projected to increase at a CAGR of 33% over the same period. Growth is expected to be supported by higher volumes and a greater contribution from the company's more profitable overseas operations.

Revenue is forecast to nearly double from Rs 16,770 crore in FY26 to Rs 33,217 crore in FY29. EBITDA is projected to increase from Rs 2,236 crore to Rs 5,138 crore, while net profit is estimated to rise from Rs 1,613 crore to Rs 3,805 crore.

Earnings per share are expected to climb from Rs 61.15 in FY26 to Rs 144.25 in FY29. Jefferies also expects EBITDA per tonne to improve to between Rs 23,000 and Rs 25,000 during FY27-FY29 as the overseas business accounts for a larger share of earnings.

Order book and balance sheet

Welspun's order book stood at Rs 42,100 crore, equivalent to around 2.5 times its FY26 revenue and providing strong visibility on future sales, according to Jefferies.

The brokerage expects the company's net cash position to rise from Rs 1,400 crore at the end of FY26 to Rs 3,900 crore by FY29. It also forecasts free cash flow of Rs 1,100-2,000 crore during FY28 and FY29 as operating cash generation improves and capital expenditure moderates.

Welspun delivered an average return on equity of 21% during FY24-FY26. Jefferies expects the ratio to remain at 22-23% during FY27-FY29.

Key risks

Jefferies identified slower-than-expected order inflows in the US and the Middle East, margin pressure from increased competition, and delays in commissioning new capacity as the key risks to its thesis. Elsewhere in the report, it also flagged sluggish execution of Indian infrastructure projects and the company's relatively high working-capital requirements as factors that could affect volumes and cash generation.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)