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Home textile drives growth; high RM costs hurt gross margin

Welspun Living (Welspun)’s revenue surged 24% YoY, led by the home textile portfolio, which grew 26% YoY and the flooring revenue, which rose 7% YoY. Gross margin dipped 246bp YoY to 45.2% because of an increase in raw material costs, while EBITDA margin settled higher at 11.5% (+151bp YoY), led by volume recovery, improving business mix, and cost-saving initiatives. We expect Welspun to continue delivering double-digit revenue growth, fueled by volume recovery in the home textile segment. Further, we expect its EBITDA margin to expand to ~13%, the business mix to improve in the home textile segment, and margins to recover in the flooring business. Welspun’s operations at the Vapi facility were hit by floods and are being restored in a phased manner. 2QFY27 is expected to be hurt by the plant closure, while recovery is expected in 2HFY27.

Robust home textile growth, driven by bath and followed by bed

Welspun’s revenue grew 24% YoY to INR28b in 1QFY27, driven by robust growth in the home textile segment to INR26.8b (+26% YoY). Bed linen volumes increased 2% YoY, while bath linen volumes declined 11% YoY. The pillow business is ramping up, with management expecting FY27 revenues to be double of FY26 at USD60m. The Ohio facility is currently at 81% utilization while the Nevada facility is ramping up. The flooring business declined 3.1% YoY to INR1.8b. Management expects the flooring business to scale up with the company focusing on soft flooring and geographic expansion in Australia, New Zealand, and Canada. Management expects utilization to be ~80% across all segments, driven by improving demand due to easing US tariffs, UK, and EU FTAs, and geographical expansion in flooring.

EBITDA margin improves in the flooring business; RM pressure continues

In 1Q, gross margin contracted 246bp YoY to 45.2%, because of higher raw material costs. EBITDA grew 42% YoY to INR3.2b, with EBITDA margin at 11.5% (+151bp YoY), driven by an improving business mix, volume recovery, and costsaving initiatives. The margin in the flooring business improved to 10.4%, supported by a shift towards soft flooring, a better business mix, and operating leverage. Management expects gross margin to remain at similar levels, hit by higher raw material prices, while guiding for a low-teens EBITDA margin

Valuation and view: Reiterate BUY

We expect Welspun’s core business, home textiles to improve and grow at a 15% CAGR over FY26-28 and drive a better margin mix. Within home textiles, Bath is expected to grow in the high-teens, followed by high-single-digit growth in Bed and Rugs & Carpet. The emerging business is expected to grow at 17% over the next couple of years. We expect a CAGR of 15%/44%/101% in revenue/EBITDA/PAT over FY26-28, led mainly by growth in the emerging business, followed by the home textile portfolio. We raise our earnings estimates, led by better visibility and reiterate our BUY rating with a TP of INR215, valuing the stock at 12x FY28E EV/EBITDA. Key risks: customer and geographical concentrations, and commodity price movements (refer to our IC note dated Jun’26).

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