Hold Welspun Living Ltd For Target Rs.209 By Sushil Finance
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Welspun Living Ltd. recently announced its performance for the quarter ended June 30 2024. Following are the key highlights
Highlights from the Quarter (Q1 FY25) :
During Q1 FY25, the top line went up by 16% yoy to Rs.2,536.5 cr on account of strong 20% yoy growth in the exports despite issues in Red Sea. Growth during the quarter was driven by the volumes, while pricing was flat. Home textiles (91% of the sales) reported a growth of 17% yoy in revenue to Rs.2,387 cr, while flooring revenue reported revenue of Rs.228 cr, a growth of 1% yoy. Flooring sales were impacted due to the Red Sea crisis, however, the company expects a recovery in Q2FY25. On flooring, the management expects 20% CAGR over next 3- 4 years, with EBITDA margins to touch approx. 15-16% as against 9% as on Q1FY25.
EBITDA margin for the company was impacted marginally by 40 bps qoq to 13.5% in Q1 FY25.
The board of directors approved a capex investment totalling about Rs.850 cr to set up a new towel capacity of 6400 metric ton per annum at Anjar (present capacity – 90000 MT), to set up a pillow manufacturing facility with a capacity of 6.7 million in Ohio USA and investment for transmission lines for the new renewable energy facility being set up at Gujarat.
The company has guided a revenue growth of 10-12% in FY25 and EBITDA margin to be in the range of 15-15.5%. Management is confident that once emerging business like flooring, domestic and advanced textile gain traction, it can have a margin of 16-17% in the next couple of years.
OUTLOOK AND VALUATION
Raw material have peaked and are reflected in the margins in the current quarter. On the revenue front, we expect a gradual pickup due to long-term drivers like China+1 and possible FTAs with UK and EU and established brands. Going forward, we expect the company to deliver an EPS of Rs.11.6 in FY27, we arrive at a target price of Rs.209. We recommend a HOLD at current levels within the time frame of 18-24 months
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