Buy Welspun India; target of Rs 101: Edelweiss

Welspun India’s (WLSI) second biggest customer, Target (10% of revenues), has cancelled its contract because of the origin/provenance issue related to the Egyptian cotton used for its bed sheets. As an immediate rectification, WLSI has initiated an external audit (by one of the Big 4 auditors) of its supply systems and the process is expected to be completed over next 6-8 weeks. While this issue is a blemish and the loss of this contract will lead to a fall in FY17/18E EPS by 11%/14%, we believe this will not impact WLSI’s core business and key customers, given its long standing relationships and strong execution track record. We retain our FY18E EV/EBITDA target multiple of 7.0x and maintain ‘BUY’ with TP of INR 101 (INR 116 earlier).For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.