Sharekhan has given Buy recommendation for Welspun India with a target price of Rs. 170 in its research report issued on Dec 23, 2021

Sharekhan’s research report on Welspun India

Welspun India Limited (WIL) expects to maintain double-digit revenue growth in the home textile segment with buoyant demand environment and share gains in US home textile exports. Business is expected to post a CAGR of 15% over FY2021-FY2024. Raw-material inflation and higher logistics cost to pull down margins in the near term. Doubling of margin-accretive emerging businesses such as flooring (Rs. 750 crore-800 crore by FY2024) and advanced material (Rs. 650 crore-700 crore by FY2024) would help margins to improve to 20% and above in the coming years. The company is targeting to become net cash positive by FY2025-FY2026 by repaying debt of Rs. 500 crore-600 crore per annum because of improving cash flows. RoE and RoCE to improve to 22.9% and 23.2%, respectively, by FY2024 from 16.6% and 1.4% in FY2021.

Outlook

We maintain Buy on Welspun India Limited (WIL) with a PT of Rs. 170. The stock is trading at attractive valuation of 14.8x/11.5x its FY2023/FY2024E EPS.

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