Welspun India- fundamentals remain intact: Sharekhan

Sharekhan research report on Welspun IndiaOn the back of concerns related to the Chinese currency depreciation, a likely risk of heightened competition from the domestic players like Trident (entering into the bed sheet segment) and Himatsingka Seide (entering into the terry towel segment), Welspun India underperformed the market and the stock is 21% down from its all-time high (down 13% over the last month). We believe that Welspun India, over the years, on the back of consistent quality, increased innovation and FMCG-like approach in managing the client-shelf space has created a strong clientele reach in its key markets, which is difficult to replicate in a mature industry like the US home textile market. Further, with its efforts towards consistent growth; calibrated capex (in line with the ancilarisation model adopted by auto players), would pave way for sustaining margins and improving return ratios ahead. At the current price, the stock is trading at less than 10x its FY2017 estimates, which is attractive and hence we have a positive view on the stock and expect it to deliver over 22-25% returns in medium term.

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