Buy Welspun India: target of Rs 90: Sharekhan

Sharekhan's research report on Welspun India

India’s exports of terry towels and bed-sheets to the US grew by ~19% and 47% in January. For both products, the share of exports improved by 570BPS and 510BPS for both the products. Welspun’s share in US terry towel exports stands at 20% and bed-linen around 11-12%. Share gains in home textile segment exports to US, scale-up of flooring business (likely to contribute Rs450-500crore in FY23) and advance textiles business (likely to contribute Rs600crore in FY23) are long-term growth drivers. The government’s PLI scheme is also likely to offer incremental benefits. Despite a strong capex plan to support growth in key segments, net debt is expected to remain at Rs. 2,400 crore as large capex funding will be done by improving cash flows.

Outlook

We retain a Buy on Welspun India (Welspun) with a PT of Rs. 90; higher export opportunities in home textile and flooring business and a likely beneficiary of the PLI scheme in advance textiles business make it a better play in the space.

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