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Welspun India Ltd. recently announced its performance for the quarter ended March 31 2022. Following are the key highlights.

Highlights from the Quarter (Q4 FY22) :

During Q4 FY22, the top-line grew 4.3% yoy to Rs.2,227.1 cr and on sequential basis, the top-line was down 7.9%. On full-year basis, the company has delivered a strong top-line performance for FY22 with revenue growing at 26.6% to Rs.9,377 cr. The robust top-line growth was driven by strong volumes; the company achieved highest ever sales volume in bath linen and bed linen during the fiscal. The demand for the home textiles products was subdued in Q4 FY22, on account of oversupply in the market, aided by logistics and supply chain challenges. The flooring segment saw a pick-up in sales, with 60% yoy growth. The company has added new customers in the Middle East, Africa and Far East and it expects repeat orders from them in this segment.

EBITDA margin contracted by ~300 bps qoq to 10.2% in Q4 FY22. It faced multiple headwinds like an unprecedented rise in key raw material prices, increase in energy costs and disruptions in the global supply chain, which has further worsened due to the Ukraine-Russia conflict. Ocean freight rates have tripled on yoy basis, while container shortages and shortage of truckers in the US have led to transit free operating issues. The flooring segment saw an operating loss on account of some merchandise, which got damaged in transit. Excluding this event, flooring segment would have been EBITDA positive.

According to the management, the demand outlook for the near term is muted. The medium to long term fundamentals remain strong and the government is taking steps to reduce the prices of cotton, which would have a positive impact on the margins of the company.

OUTLOOK AND VALUATION

We have incorporated FY24 in our estimates and forecast Welpsun’s revenue/PAT to grow at 10.1%/9.0% CAGR over FY21-24E. Going forward, we expect the company to deliver an EPS of Rs.7.0 in FY24; In light of headwinds being faced by the company in the short-run and volatility in the markets we have reduced our target P/E multiple to 22x, thereby, arriving at a revised target price of Rs.153. We recommend a BUY at current levels with time frame of 18-24 months.

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