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Tariff remains an overhang in near-term; long-term story intact

Welspun Living reported an EBITDA of INR1.5bn, lower than JMfe of INR1.7bn. EBITDA was down ~57% YoY driven by tariff related impact and higher other expenses (+12% QoQ). Margins remained under pressure during the quarter due to lower volume offtake given continued tariff uncertainty. Key takeaways from the concall are a) company witnessed lower shipments in 2Q; realizations were also impacted as discounts were given to retailers (only ~1 month ops were impacted in 2Q) – full impact of tariffs to come in 3Q b) flooring business performance continue to be impacted given subdued housing activities and projects leading to muted demand for hard flooring – however, soft flooring remains on track for a growth of ~20% c) company’s pillow and TOB facility in Nevada is expected to be operational by Feb’26 while the Ohio facility currently runs at ~50%+ utilisation levels. Capex during the quarter stood at INR870mn – primarily towards efficiency enhancement and the ongoing hybrid wind and solar power transmission line. Net Debt stood at ~INR15.7bn as at end of 2Q vs ~INR14bn as at end of 1Q. Company has appointed Mr. Manish Bansal as the President and CFO of Welspun Living. We believe nearterm tariff headwinds are going to weigh on the company’s earnings for FY26. However, longterm outlook remains stable given company’s strong presence in the Home Textiles segment. We revise our earnings downwards by 65% / 13% / 4% for FY26E / FY27E / FY28E. We rollforward our TP to FY28E at a multiple of 21x. Maintain BUY.

* Margins under pressure amid higher tariffs: The Company reported net sales of INR24.4bn, down 15% YoY given tariff headwinds impacting the Home Textile segment revenue (-14% YoY). Flooring revenue was also down 59% YoY. Consolidated EBITDA came in at INR1.5bn, down 57% YoY driven by tariff related impact and higher other expenses (+12% QoQ). Consolidated EBITDA margin remained muted at 6.3% in 2QFY26 vs. 12.4% in 2QFY26. Margins remained under pressure during the quarter due to lower volume offtake given continued tariff uncertainty. Adjusted PAT came in at INR130mn vs. INR2bn in 2QFY25, down significantly YoY. The global retailers maintain a cautious stance and are currently focused on correcting their inventory levels.

* Muted performance across segments: Home textile revenue decreased YoY by ~14% to INR23.2bn. The flooring business revenue decreased by ~27% YoY to INR1.8bn. Home textile business reported EBITDA of INR1.5bn with margins at 6.6% during 2QFY26 vs 13.8% in CQLY. Flooring business reported EBITDA of INR38mn, down significantly by ~83% YoY. Flooring business continues to be impacted given subdued housing activities and projects. Soft flooring remains on track for a growth of ~20% however, hard flooring demand remains impacted. Bath Linen capacity utilisation decreased to 76% vs 88% in 1Q while Bed Linen capacity utilisation increaed to 75% vs 67% in 1Q. Capacity utilisation for Rugs & Carpets came in at 78% vs 81% in 1Q.

* Tariff remains an overhang in near-term; long-term story intact: Company witnessed lower shipments in 2Q and realizations were also impacted as discounts given to retailers (only ~1 month ops were impacted in 2Q). Company believes the full impact of tariffs to come in 3Q with a further visibility on 4Q to come in the next 1 month. Overall towel and sheets exports to the US declined by 44% and 8% respectively over Jan-Jul’25. However, company has maintained its market share amidst this challenging environment. Company had earlier approved a capex of USD13mn towards setting up a pillow and TOB facility at Nevada, USA – to be operational by Feb’26.

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SEBI Registration Number is INM000010361