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This Mumbai-based textile firm's shares dive 18% post Q4. Experts stay optimistic ahead

In terms of segment-wise performance, home textile business revenue stood at  ₹8,791,1 crore in FY22 up 23.3% yoy, flooring revenue came in at  ₹661.1 crore up by a whopping 107.4% yoy.  (Pradeep Gaur/Mint)Premium
In terms of segment-wise performance, home textile business revenue stood at 8,791,1 crore in FY22 up 23.3% yoy, flooring revenue came in at 661.1 crore up by a whopping 107.4% yoy.  (Pradeep Gaur/Mint)

  • For full-year FY22, consolidated PAT is at 601.2 crore up by 11.4% yoy, while EBITDA came in at 1,424.6 crore with a margin of 15.2%. Consolidated total income stood at 9,377.3 crore rising by 26.6% yoy.

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Mumbai-based textile firm, Welspun India witnessed a selling frenzy on Wednesday after announcing its financial performance for the quarter and year ended March 31, 2022. Investors booked profits heavily as they reacted to the decline in net profit and EBITDA during Q4FY22. However, the company's revenue crossed the $1 billion mark for the full year FY22. After the earnings, analysts are optimistic about the shares with expectations of double-digit growth on exchanges going forward.

At around 3.22 pm, Welspun India's shares were trading at 63.35 apiece down by 17.78% on BSE. The shares have dived by at least 18.9% today with an intraday low of 62.50 apiece. The shares almost neared its 20% lower circuit of 61.65 apiece - however, refrained from doing so.

On the previous day, Welspun shares closed at 77.05 apiece on BSE.

During Q4FY22, Welspun India's consolidated PAT stood at 52.2 crore down by 59.9% from 130.1 crore in the same quarter last year. EBITDA stood at 246.4 crore declining by 31.2% from 358.2 crore in Q4FY21. EBITDA margin contracted by 551 basis points to 11% from 16.5% in Q4FY22. On the other hand, the top-line front recorded single-digit growth with consolidated total income coming in at 2,247.1 crore up by 3.4% from 2,173.6 crore in Q4FY21.

For full-year FY22, consolidated PAT is at 601.2 crore up by 11.4% yoy, while EBITDA came in at 1,424.6 crore with a margin of 15.2%. Consolidated total income stood at 9,377.3 crore rising by 26.6% yoy. In terms of segment-wise performance, home textile business revenue stood at 8,791,1 crore in FY22 up 23.3% yoy, flooring revenue came in at 661.1 crore up by a whopping 107.4% yoy.

On the performance, B.K. Goenka, Chairman, Welspun Group, said “The global economy is going through unprecedented times currently - Ukraine-Russia conflict, logistical challenges, unseen levels of increases in commodity prices and decades’ high inflation in western economies - have all come on the back of an extended pandemic and resulted in dampened business sentiments across industries worldwide. Against this backdrop, it is very heartening to see that our Home Textile revenues continued its upward trajectory to cross $1bn mark this fiscal, growing by 23% and total revenue growing by 27% to reach 9,377 crore."

"This demonstrates the ability of scaled-up, quality-led, and highly differentiated players to maintain an edge even during challenging times. The recently announced Free Trade Agreements with Australia and Middle-East countries would bring in additional advantage for the Indian Home Textiles industry and players like Welspun," Goenka added.

On the sustainability front, Goenka said, "Welspun has set benchmarks for the industry through its differentiated efforts in all areas of Environmental, Social, and Governance (ESG) where several significant outcomes have already been achieved. In Home Textiles, we have been recognized by Tesco and awarded with their Sustainability & Community Award for exceptional focus on community initiatives and for outstanding ethical performance. I am also delighted to share that in our Flooring plant, 15% of total energy currently being used is from renewable energy and the target is to reach 25% by 2025 and 50% by 2030."

Should you buy Welspun India shares?

Ashutosh Somani and Heet Vora analysts at JM Financial said, "The capital-light expansion at Vapi and Anjar which was announced in Q3FY21 has been completed. The new capacities are ready for use from Q1FY23. Greenfield Spunlace Capacity addition project in Telangana started commercial production from March 2022. The Flooring capex project is expected to be completed by Q2FY23. The company spent 5.4 billion towards capex in FY22. Net debt for the company decreased sequentially to 22.3 billion."

"Inflation in commodity prices and logistical challenges are likely to result in muted demand environment in the near term. Consequently, we downward revise our earnings/fair value," the duo added.

However, the analysts also said, "the long term structural story remains intact."

They added, "Structural drivers like increased emphasis on health & hygiene driven by pandemic, duty reimbursement by GOI, US ban on Xinjiang imports and market share gain on China+1 theme are expected to drive earnings trajectory going forward. Further, FTA with Australia and India’s decision to set up a “trade and technology council" to boost bi-lateral trade between India and EU is likely to bode well for the company. Maintain BUY."

JM Financial analysts have given a buy rating with a 12 months target price of 100 apiece with an upside of 30% ahead. This was taken into consideration on Tuesday's closing price. Thereby, the selloff in Welspun shares today makes it, even more, cheaper to add to the portfolio to fetch double-digit growth ahead.

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