Welspun India Limited – Fashion for Home

Welspun India Limited is the global leader in Home Textiles with global reach, delivering to more than 50 countries. The company is a leading exporter to the USA for four consecutive years in a row. It supplies its products to 18 of the Top 30 Global Retailers viz. Bed Bath and Beyond, Target, Macy’s, Wal-Mart and JC Penney among others  The company owns brands such as ‘Christy’, ‘Spaces’ and ‘Welhome’ which constitute around 11% of the sales. The company has a strong emphasis on innovation which is reflected in the number of patents and trademarks which it holds and has applied for. More than 34% of the total revenues of Welspun come from the innovative products developed by the company.

Financial Performance Q1FY17

Sales grew by 14.3% on a YoY, Operating EBITDA margin was up by 19bps and stood at 26.5%. PAT grew by 10.3% on a YoY basis and stood at Rs. 2018 million.

Investment Rationale

• Textiles business has been growing at a CAGR of 25% since the inception of the Anjar (Gujarat) Manufacturing Facility.
• Sustained growth indicates the potential of Home Textiles globally.
• Widest product range in the Home Textiles segment A) Bath – Towels, Bath Robes, B) Bedding – Sheets, TOB, basic & fashion bedding, C) Flooring – Carpets, Rugs.
• Strong track record of customer satisfaction and repeat business from them; 80% revenue from replenishment.
• Uniquely positioned for cross-selling due to,  a) Customer reach,  b) Competitive manufacturing , c) Global delivery model.
• Higher wallet share due to multi-product portfolio.
• Strategic Partnership with marquee clients across geographies.
• Capacities running close to full utilization in towels and sheets.
• Investment of approx. Rs.8 bn expected in FY17 (including Q1FY17 capex of Rs. 1.4 bn) which will result in capacity growth with minimal headcount increase.
• Launched nation-wide campaign in the US in FY16 to introduce patented Hygrocotton technology to consumers, first ever such campaign in textiles in the past 15 years.
• Strong growth expected in the branded category, especially in India.
•  Welspunind has ‘Spaces’ and ‘Welhome’ as their brand in India. It is focusing on increasing its penetration of these brands through shop-in-shop and e-commerce.
• Management is optimistic about India’s competitiveness in the global market and is focusing on new categories like comforters, basic bedding and rugs and carpets

Investment Opinion

Welspun India share price is trading at 103.20 at a P/E of 14.17; its market cap is 10539.57 crores and its 52 Week High / Low is 119.90 and 66.60 respectively. One can buy the stock at 104 adding on dips till 98 which is its Month 1 low as per Dynamic Levels for a target of 120.