Buy Welspun India; target of Rs 130: Sharekhan

Sharekhan's research report on Welspun India

Welspun India Limited’s (WIL’s) Q1FY2024 performance was better than our and street expectation due to higher-than-expected EBIDTA margins. Revenue grew by 12% y-o-y, while EBIDTA margin expanded by 650 bps y-o-y to 14.2%, resulting in 6.5x y-o-y growth in PAT. Capacity utilisation of bed linen, bath linen, rugs and carpet segments is expected to stand at 90-100% as demand is expected to be high prior to the festive season. Management is cautiously optimistic about H2FY2024. Net debt increased q-o-q by Rs. 281 crore to Rs. 1,815.1 crore due to working capital requirement. Management maintained its target of net debt reducing to Rs. 1,000 crore by FY2024-end.

Outlook

The stock trades at 18x/14x its FY2024E/FY2025E earnings. With consistent improvement in capacity utilisation and better growth prospects in export markets, we upgrade our rating on the stock to Buy from Hold with a revised PT of Rs. 130.