The management has maintained guidance of 10-12% for revenue growth and 15-15.5% for EBITDA margins for 2024-25. It is optimistic about improving margins to 16-17% over the next few years, which will be supported by a strong growth potential in exports and traction in emerging businesses (flooring, advanced textiles and domestic consumer).
The company exports to over 50 countries. It offers a diversified product portfolio that includes bed linen, bath linen, rugs, flooring solutions, curtains and mattresses. Factors like durability, changing consumer preferences and lifestyle, rising preference for customised bathroom products, demand for home décor and the growing real estate sector are driving the demand for home textiles. On the other hand, rapid industrialisation, expansion of offices and workspaces and innovation in designing are supporting the flooring segment.
The prospects of export market are getting better, with a healthy demand outlook from the US, which is reflected in the positive commentary from Walmart and Target. The upcoming opportunities during the US holiday season are expected to provide robust order book visibility for Welspun.
Other factors like subdued cotton price outlook, government support through the PLI scheme, and the ‘China plus one’ strategy will bode well for the company. The possible FTAs (free trade agreements) with the UK and Europe can open other markets for the company.Welspun has taken strategic steps to maintain its competitive position. Focus on branding and innovation, product development, R&D, value-added services such as supply chain analytics, augmentation of online presence through marketplaces such as Myntra and Amazon, and omnichannel presence through stores and D2C sites are some such initiatives. The management has maintained a capex guidance of Rs.860 crore for 2024-25, which will be apportioned for terry towel projects, transmission lines and modernisation. The expenditure is expected to improve revenue visibility and productivity. The margins are set to improve as energy capex (renewable energy transmission line) will help reduce power costs in the future. The stock has significantly outperformed the market benchmark in the past year, with 70.4% returns compared to the BSE Sensex’s 22.9% returns.Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past month. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.
