Sharekhan's research report on Welspun India
Welspun India (WIL) registered a mixed bag show in Q3FY2023 with revenues declining by 23% (affected by lower export demand) while gross margins improved by 481 bps y-o-y to 48.8% led by decline in the cotton prices (OPM improved by 434 bps q-o-q to 10.4%). Core home textile business is impacted by higher inventories with global retailers due to lesser offtake in the inflationary environment. The same is expected to come back on track by Q2FY2024. Domestic consumer business (to grow at CAGR of 30-35%) and emerging businesses such as advance materials and flooring are expected to scale-up fast in the coming years. EBIDTA margins will sequentially improve, while on a y-o-y basis might remain lower due to muted sales volumes.
Outlook
Stock is currently trading at 13.1x/9.0x its FY2024E/25E earnings. In view of near term pressure on the core home textile exports business, we retain a Hold rating with a revised PT of Rs. 75.
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