On all fronts robust performance, simply growth catalyst: Strong Buy Welspun Corp posted revenues of INR 22,629 mn with 5.1% YoY increase, which was 7.2% lower than our estimate of INR 24,390mn. Revenue growth was mainly driven by higher realization per ton by 24.4% which was largely offsetted by lower sales volume by 15.5% (India + USA). Current orderbook stands at 1357 thousand metric tonnes valued at around INR 110,000mn. Apart from this, global bid book stands at 2.5 million tonnes and upcoming orders for bidding at another 20.5 million tonnes. This provides strong visibility for coming quarters. Company registered highest ever quarterly production of 443 thousand metric tonnes while sales volume stood at 337 thousand tonnes (including Saudi JV), the difference in inventory buildup is due to large export order which are yet to be delivered to client site. We can expect sequentially higher revenue booking in Q3FY20. Operating profit stood at INR 3,305mn up 36.7% YoY while margins expanded by 340bps to 14.6% beating our estimate in big way due to improved product mix and easing RM costs. Operating profit/t for the quarter for India, US and Saudi JV stood at USD 89/t, USD 360/t and USD 230/t respectively compared to USD 74/t, USD 209/t and -USD 90/t YoY. Management increased guidance of Operating profit/t for full year FY20 for India, US and Saudi JV to USD 80/t, USD 250/t and USD 150/t respectively. Adj.PAT reported at INR 1,610mn against INR 588mn up 188% driven by the solid turnaround in Saudi JV from INR 322mn loss in Q2FY19 to INR 580mn profit even after higher tax. During the quarter, company reduced net debt level to INR 1,969mn from INR 2,856mn previous year and management is confident to be zero net debt by year end. Over sale on PCMD business, parties to the agreement are in advance stage of seeking approval from regulatory authorities and timeline for closing of deal would be assessed post approval. Owing to this, we are expecting to cross previous deadline of 31st December 2019.

Company is well poised to accelerate growth going forward with higher order book of 1.712 million MT along with continuous execution of more than 1 million MT since last 5 years. With strong traction in US Oil & Gas sector, strong demand from Saudi Aramco and SMCC and gas grid development in India, order inflow and execution to move higher. This would lead to higher capacity utilization levels, improvement in margins from better sales mix and revenue growth from better execution. Company has no capex plan in medium term as enough spare capacity would be available to cater demand in medium term. Owing to higher utilization, turnaround in Saudi Arabia business and better revenue mix would lead to higher profitability and free cash flows. The consideration received from sale of non core assets would be firstly utilized to prepay debt before maturity and balance would be rewarded back to shareholders in form of dividend or buyback. Going forward, we expect return ratios (RoCE and RoE) to see further improvement and reach 16.9% and 13.6% by FY2021E. As the visibility on earnings improved, we expect Net Sales to grow CAGR of 7% from FY19-FY21E, EBITDA margin is set to improve to 7.9% and PAT to see turnaround with profit of Rs.5,171 mn and marins of 5.6% in FY21E. We initiate coverage on the stock & recommend ‘BUY’ rating by assigning EV/EBITDA 4x to its FY21E EBITDA . We arrive at a target price of INR188 (potential upside of 32.4%) for an investment horizon of 12-15 months.

The industry is all abuzz with news of high visibility investment in Domestic Oil Refineries and exciting opportunities emerging in other segments. The resultant growth momentum is expected to hold sway for the next decade. With new capacities and facilities, Ratnamani Metals and Tubes Ltd. is fully equipped to exploit the upcoming prospects. The company has able to make difference through delivering premium products, offering wide product portfolio and becoming preferred supplier. This helps to maintain market leadership, higher margins and ability to afloat during turbulence times. A decade of expansion and diversification later, company is at a very important juncture of record high order book as well as international orders. Considering its leadership position in the domestic stainless steel pipe segment, we believe Ratnamani is best suited to benefit from the impending revival in the domestic capex cycle in oil refinery, petrochemicals, power and fertilizer sectors. We expect Revenue/EBITDA/PAT to grow at CAGR of 23.3%/33.4%/31.1% respectively from FY18-FY21. Thus, we recommend buy rating for a target price of INR 1280 (upside 40%) valuing at 18x PE to FY21E EPS.

Company Background Incorporated in 1998, Indraprastha Gas Ltd. (IGL) is the sole city gas distribution (CGD) company for natural gas in the National Capital Region (NCR). It was formed following a Supreme Court directive to GAIL to set up a CNG infrastructure unit in the NCR. It caters to consumers in the domestic, transport, industrial and commercial sectors. Currently, GAIL, BPCL and the Government of Delhi hold 22.5%, 22.5% and 5% respectively in the company. IGL is sole distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Delhi, Noida, Greater Noilda and Ghaziabad. The CNG business contributed ~74% to the company's sales volumes in FY18. It has acquired 50% equity stake in Central UP Gas Limited (CUGL) for a total consideration of Rs 700mn, which is the authorised CGD operator in Bareilly, Kanpur, Unnao and Jhansi in Uttar Pradesh and also acquired a 50% equity stake in Maharashtra Natural Gas Limited (MNGL) for a total consideration of Rs 1.9bn which is the authorised CGD operator for Pune and the adjoining areas in Maharashtra. Investment Rationale Efforts by regulatory authorities favoring natural gas demand India is the world’s largest consumer of petcoke. The consumption of the dirty fuel has grown at CAGR of 16 per cent over the past 10 years. This has led to the fuel becoming the second-most consumed petroleum product in the country after diesel. While coal attracts a clean-energy levy of Rs 400/tonne, petcoke was exempt. As it was among the cheapest fuels available to the industry, it was widely used for heating and generating electricity. About half of the Indian consumption of petcoke -about 26 mn tonnes in financial year 2017-18 was imported. Regulatory Authority passed complete ban on use of petcoke by industries, except for a few industries, such as cement and electricity gasification, which have been exempted from the ban. Other industrial users would have to now shift to alternate fuels like natural gas over a period of time. The ban on pet coke came in response to the high level of pollution in several cities across the country. The ban would benefit the entire supply chain of natural gas as CGD entities should see an increase in PNG (industrial) volumes over medium term. The shift from furnace oil which is around 30% cheaper and pet coke that is at a fraction of the cost of natural gas will happen over time as those entities currently using pet coke need to incur investment to switch fuels. Enjoys monopoly of being sole supplier of natural gas in Delhi-NCR The statutory authorities like the Environment Pollution Control Authority (EPCA), Centre for Science and Environment (CSE), Delhi Pollution Control Committee (DPCC) and Uttar Pradesh Pollution Control Board (UPPCB) are working in a synchronized manner to curb pollution levels in Delhi and NCR . This has paved the thrust for city gas distribution sector for use of more greener sources of energy like natural gas. Under the PNGRB Act, entities were provided ultimate monopoly through exclusive marketing rights and infrastructure rights for 8 years and 25 years respectively. IGL stood to grab this opportunity and now it services the highest no. CNG vehicles in India with ~33% market share. Measures taken by the various authorities have been instrumental in supporting CNG growth. IGL is now looking at setting up CNG dispensation stations within residential housing complexes to ease queues at CNG pumps. It has set up two CNG dispensation pumps at a residential complex in Noida on a pilot basis. Overall, the company is targeting to add 60 CNG dispensation stations (out of which 2 were added in Q1FY19).In comparison, its peer Mahanagar Gas Ltd recorded a total volume growth of just 19% and CAGR of 4.5% from FY14-18, shows taking same period for comparison IGL’s operations grew almost at double rate compared to MGL. Going forward, we expect the revenue growth to be driven by 1)associate companies-CUGL and MNGL and 2) expansion i