Moneycontrol
Last Updated : Apr 10, 2017 09:19 AM IST | Source: Moneycontrol.com

Here’s why Credit Suisse has initiated coverage on Welspun India

The research firm has highlighted the company’s growing market share, advantage in home textiles and 15 percent revenue growth in FY19 as few of the reasons behind the call.

 
 
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Shares of Welspun India soared over 8 percent intraday on Monday after Credit Suisse initiated coverage on the stock.

In its report, the research firm initiated coverage with an outperform rating and a target price of Rs 115. The firm highlighted that Welspun was a leading player in cotton towels and bed sheets with a continuously growing market share.

Furthermore, while there is an expectation of 8 percent CAGR by global home textile market, India has an advantage in cotton home textiles due to excess supply and competitive production costs.

On the financial front, the company posted 17 percent revenue CAGR over FY12-16 and the next leg of growth is likely to be driven by new products and channels, geographies and innovative, branded products, the brokerage analysts at the firm wrote in the report.

The research firm expects 15 percent revenue growth in FY19 and over 20 percent growth in earnings per share (EPS). “The new flooring capacity will also be operational in FY20 and can add 8-9 percent to FY20 revenue growth,” it said. Credit Suisse also estimated 6 percent FY19 free cash flow yield.

Credit Suisse saw global trade barriers, high customer concentration and volatility in cotton prices or currency to be the risks. “Provenance issues of Egyptian cotton sheets led to 13% revenue loss. However, Welspun handled the situation well, and this should be out of the base in second half of FY18,” it said in the report.

The stock has seen strong movements in the past one month, posting gains of 2.53 percent, while its 15-day gain stood at 10.76 percent. In the past three days, the stock has risen nearly 4 percent. At 09:17 hrs, it was quoting at Rs 89.05, up Rs 4.85, or 5.76 percent on the BSE. It touched an intraday high of Rs 91.10 and an intraday low of Rs 88.50.
First Published on Apr 10, 2017 09:07 am
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