Localized US manufacturing may shield Welspun from tariff impact: MD

ET Intelligence Group: Shares of Welspun Corp, a global pipes manufacturer, have slipped nearly 7% since July 30 following US President Donald Trump's announcement of new tariffs, erasing about half the gains made after the company's July 29 results announcement. However, the management said that the company remains unaffected by these measures given its localised production base in the US.

"I am a local producer in America. I am not dependent on any export out of any other continent or India," said Vipul Mathur, MD, Welspun Corp in an earnings call. "Tariffs in America might be hampering globally, but for Welspun, it is helping us."

Welspun Corp's subsidiary, Welspun Tubular, operates a manufacturing plant in Arkansas, USA. This facility produces large-diameter pipes specifically for the oil and gas sector. Last year, Welspun Corp announced a $100 million expansion and upgrade to its high-frequency induction welding (HFIW) pipe manufacturing facility.

Welspun's stock has gained nearly 40% over the past 12 months, including gains of 20% in the past six months and 15% in the past quarter. The rally reflects investor confidence in its strong order book, global expansion, and steady demand from the oil, gas, and water infrastructure companies.

The company's current order book size is ₹19,000 crore, providing revenue visibility for around eight quarters in the US market and over four quarters across its domestic operations.

Welspun is expanding in Saudi Arabia through a joint venture with energy giant Saudi Aramco. Construction of a new longitudinal submerged arc welded (LSAW) plant in Dammam is progressing on schedule. With an annual capacity of 350,000 metric tonnes, the facility is targeted for commissioning by the end of FY26.

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Closer to home, the company is expanding its footprint in India, venturing into new regions such as Chhattisgarh, Punjab, Goa, Odisha, and Telangana, beyond its existing markets in Gujarat, Rajasthan, and Madhya Pradesh.

Despite capital expenditure of around ₹450 crore in the June quarter, Welspun remained a net-cash company. It has guided for a capital expenditure guidance of ₹5,482 crore for FY26 to be funded largely through internal accruals.

Welspun has set the targets of ₹17,500 crore in revenue and ₹2,200 in operating profit before depreciation and amortisation (Ebitda) for FY26. "Improved scale across businesses buoyed by macros will help capitalise on operating leverage, while strong cash flows will further reduce financial leverage," JM Financial noted in a recent report.

The broking firm has issued a price target of ₹1,180, 35% higher than Tuesday's closing stock price of ₹875 on the BSE.