Recommendation From Textiles - Weaving Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.  

WELSPUN INDIA LIMITED : MAINTAINING A GLOBAL EDGE

HERE IS WHY
✓Good financial improvement
✓Good growth prospects
✓Focus on Cost Reduction

Welspun India Limited is part of the Welspun Group. It is one of the largest home textile manufacturers in the world. The company offers a wide spectrum of home and technical textile products and flooring solutions. It has established itself as a thought leader within the home textile industry over the years and continues to focus on the enablers, viz. innovation, branding and sustainability to consolidate its leadership position. It manufactures a wide range of home textile products ranging from towels, bath robes to sheets, as well as basic and fashion bedding. It has also entered into the business of carpet flooring solutions.

The company reported net sales of Rs 7,340.18 crore in FY21. It had reported net sales of Rs 6,741.09 crore in FY20, an increase of 8.89 per cent. The company reported PBIDT of Rs 1,352.01 crore in FY21, an increase of 11.31 per cent. It had reported PBIDT of Rs 1,214.67 crore in FY20. The company reported PAT of Rs 550.73 crore in FY21, an increase of 5.03 per cent. It had reported PAT of Rs 524.35 crore in FY20. The company has reported cash from operating activities of Rs 953 crore in FY21 as against Rs 777 crore it reported in FY20.

Its net sales were at Rs 2,135.71 crore in March 2021, up by 32.05 per cent from Rs 1,617.32 crore in March 2020. Its PBIDT was Rs 320.33 crore in March 2021, up 28.59 per cent from Rs 249.11 crore in March 2020. The quarterly net profit was Rs 134.28 crore in March 2021 as against net profit of Rs 90.59 crore in March 2020, an increase of 48.23 per cent. US accounts for nearly 70 per cent of its revenue and it has long-standing relationships with major US retailers to whom the company supplies. In the last few months, home textile products like terry towels and bed sheets have witnessed robust demand from the US on the back of higher in-home consumption due to increased work from home period and higher emphasis on health and hygiene driven by the pandemic.

Welspun India’s Q4FY21 numbers came better than expected due to the buoyant growth in home textile business. The change in consumers’ underlying behaviour and rise in awareness in hygiene and health has resulted in reallocation of spending, driving the overall demand for home textile products. To create further capacity, Welspun India is planning to debottleneck existing capacity, which could be enhanced by 20 per cent. The company has a strong focus on innovation with 32 patents and collaborations with technology partners and industry associations. Globally, the home body economy with focus on hygiene will continue to drive demand for home textiles.

Big box retailers, supermarkets and marketplaces are expected to continue doing well across geographies. With China +1 strategy being followed by the global market, export opportunity has opened up for countries like India. Over the years the company has been able to control its balance-sheet leverage and managed its capex funding in a mix of equity and debt. Its consistent ability to generate positive operating cash flows over the period has helped the company to maintain stable balance-sheet as well as fund its expansions. The total debt to equity ratio is 1.15. On the returns front, it has ROE and ROCE of 18.23 per cent and 13.94 per cent. By virtue of these factors, we recommend our readerinvestors to BUY this stock.