Mumbai-based textile firm, Welspun India witnessed a sales frenzy on Wednesday after announcing its financial performance for the quarter and year ended March 31, 2022. Investors posted huge profits as they reacted to the fall in net profit and EBITDA during Q4FY22. However, the company’s revenue crossed the $1 billion mark for the full year of FY12. Post earnings, analysts are optimistic about the shares and expect double-digit growth on the exchanges in the times to come.
Around 3.22 pm, welspun trading on india stock 63.35 each on the BSE, down 17.78%. Shares are down at least 18.9% today with intraday lows 62.50 per. Shares close to their 20% lower circuit 61.65 each – however, refrained from doing so.
Welspun shares closed on the previous day 77.05 each on BSE.
During Q4FY22, the consolidated PAT of Welspun India was 59.9% less than 52.2 cr 130.1 crore in the same quarter last year. EBITDA stood on 31.2% drop from 246.4 cr 358.2 crore in Q4FY21. EBITDA margin declined by 551 basis points to 11% from 16.5% in Q4FY22. On the other hand, the top-line front posted single-digit growth with consolidated total income Up 3.4% from 2,247.1 crore 2,173.6 crore in Q4FY21.
For the full year of FY 22, the consolidated PAT is at 601.2 crore up 11.4% year-on-year, while EBITDA came in 1,424.6 crores with a margin of 15.2%. on consolidated total income 9,377.3 crores, an increase of 26.6% annually. In terms of segment-wise performance, the revenue of the home textile business stood at 8,791,1 crore in FY22, up 23.3% year-on-year, flooring revenue 661.1 crores with a massive growth of 107.4% annually.
On performance, Welspun Group Chairman, BK Goenka said, “The global economy is currently passing through unprecedented times – Ukraine-Russia conflict, logistical challenges, unseen levels of commodity prices and decades of high inflation in Western economies – all in one came on the back of the extended pandemic and impacted business sentiments across industries across the globe. Against this backdrop, it is heartening to see that our Home Textiles revenues crossed the $1 billion mark this fiscal year. Continuing the upward trend, grew 23% and total revenue increased by 27%. 9,377 crore.”
“This demonstrates the potential of scale-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 are part of Indian Home Textiles. Industry and players like Welspun,” Goenka said.
On the sustainability front, Goenka said, “Welspun has set benchmarks for the industry through its differentiated endeavors in all areas of Environment, Social and Governance (ESG), where many significant results have already been achieved. At Home Textiles, we have been recognized by Tesco and awarded with their Sustainability and Community Award for exceptional focus on community initiatives and outstanding ethical performance. I am also pleased to share that at our flooring plant, Currently 15% of the total energy 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?
Analysts Ashutosh Somani and Heath Vora 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 in Telangana Capacity Augmentation Project commenced commercial production from March 2022. Flooring capex project is expected to be completed by Q2FY23. The company spent 5.4 billion towards capex in FY22. Net debt to the company decreased sequentially: 22.3 billion.”
“The demand environment is likely to ease in the near future as a result of commodity price inflation and logistical challenges. As a result, we revise our earnings/fair value downwards,” the duo said.
However, analysts also said, “the long-term structural story remains intact.”
He further added, “Structural drivers such as the pandemic-induced emphasis on health and hygiene, duty reimbursement by the Indian government, US sanctions on Xinjiang imports and China+1 subject to market share gains are expected to go ahead. India’s decision to set up a “Trade and Technology Council” to promote bilateral trade between India and the EU is a good sign for the company.
JM Financial Analysts has given a buy rating with a target price of 12 months 100 epic with a further 30% gain. This was taken into account at Tuesday’s closing price. Thus, the sell-off in Welspun shares today makes it even cheaper to achieve further double-digit growth.