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Axis Securities Report
Financial Performance:
Welspun India Ltd. reported one of its strongest quarters beating our estimates on all fronts on back of strong replenishment demand in USA ahead of the festive season.
Company reproted revenue of 2509 crore beating our est of 2240 crore.
The Ebitda came in at 358 crore much higher than our est of 311 crore on account of flooring segment clocking 8.3% margins. This lead to overall profit after tax of 200 crore up 23% QoQ beating our est of 159 crore by 26%.
Outlook:
With the upcoming festive season, Welspun Living is experiencing a growth of over 50% and expects this trend to continue. We maintain our outlook on Welpsun Living as its strong brand, capacities and industry-leading position will help in the quickest demand recovery. Also, potential UK and Euro free trade agreement (combined have the same size as the U.S. Market) can open another market for Welspun India.
Valuation and recommendation:
We marginally revise our estimates to factor in better stable margins and strong operational performance with added impact of the flooring segment.
Consequently, we have increased our target price to Rs 160/share from Rs 125/share earlier resulting into 21% upside from current market price, valuing the company at 14 times its FY25E as we roll forward our estimates.
Key risks to our estimates and target price:
Delay in FTA agreements with UK and Europe,
Global recessionary and high inflation environment and the resultant slowdown in USA economy
Currency and key commodity fluctuations.
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