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Bath linen and advanced textile drive growth

* Welspun Living (Welspun) is a leading vertically integrated home textile exporter, manufacturing a diversified portfolio spanning bed linen, terry towels, rugs and carpets, advanced textiles, and flooring. Its portfolio comprises the core business of home textile and emerging businesses of advanced textiles and flooring.

* The home textile portfolio (~87% of revenue) is expected to grow 14% over FY26-28, led by bath linen (17% CAGR growth), bed linen (9% CAGR growth) and rugs (9% CAGR growth). Home textile growth is driven by lower tariffs in the US market (~59% of sales) and higher branded business (~19% of sales). We expect home textile margin to recover to a sustainable level of 13-14% from ~9% currently.

* The emerging segment (13% of revenue), comprising advanced textiles (~5% of revenue) and flooring (~8% of revenue), is primary growth driver for Welspun. Advanced textile revenue clocked a CAGR of 12% over FY22-26, and we expect ~22% growth over FY26-28. The flooring segment has witnessed 10x growth (on a low base) in the last five years, and we expect 13% growth over FY26-28, driven by strong housing demand and infra-led expansion.

* We estimate a CAGR of 14%/43%/96% in revenue/EBITDA/PAT over FY26-28, led mainly by growth in the emerging business, followed by the home textile portfolio.

* We initiate coverage on Welspun with a BUY rating and a TP of INR200, valuing the stock at 12x FY28E EV/EBITDA (20% premium to the 10-year mean).

Home textiles to grow in mid-teens; margin rebound expected

Welspun is a leading vertically integrated home textile exporter, with a diversified product portfolio that includes bed linen, terry towels, rugs and carpets, advanced textiles, and flooring. HT comprises bath linen (~52% of the portfolio), followed by bed linen (~29%), rugs & carpets (~9%), and others, such as top-of-bed, bathrobes, etc. (~10%). Bath linen is expected to grow 17% with operating margin of ~15-16%. Bed linen and rugs & carpets are expected to grow in high single digits, with new capex for bed linen. HT posted a flat CAGR over FY22-26 with a sustainable margin of ~13-14%. In FY26, the segment saw a low double-digit decline due to higher US tariffs; however, we expect HT to rebound, delivering 14% growth over FY26-28, with margins recovering to sustainable levels.

Emerging business: Key growth driver

The emerging segment, comprising advanced textiles (~5% of revenue) and flooring (~8% of revenue), is the company’s primary growth driver. Welspun has built advanced textile capacity across spunlace, needle-punch, and wet wipes, and majorly caters to the Indian market. India’s technical textile market is estimated to be ~USD54b and is expected to clock a CAGR of 12.5% over FY26-31. Advanced textile revenue saw a CAGR of 12% over FY22-26, and we expect 22% growth over FY26-28, with EBITDA margin expansion to ~16-17% from ~14% currently. The flooring industry has witnessed steady growth led by rising demand for fashionable, improving lifestyles, and expansion in commercial spaces. Globally, the market is expected to expand at a CAGR of ~5.7% over FY25-32 and we expect 13% growth over FY26-28, with operating margins of ~9-10%.

Valuation and view: Initiate coverage with BUY rating

We initiate coverage on Welspun with a BUY rating and a TP of INR200, valuing the stock at 12x FY28E EV/EBITDA (20% premium to the 10-year mean). We believe the company’s core business is expected to improve and drive a margin expansion. We expect home textiles to grow at 14% and EBITDA margins to be at ~13-14%. The emerging business (~13% of revenue) is expected to grow at 17% over FY26-28.

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