Welspun Living shares rally 11% after Q1 profit jumps 85% YoY. Should you buy, sell, or hold?
The company’s consolidated profit for the June quarter jumped 85% year-on-year (YoY) to Rs 161 crore, compared with Rs 87 crore in the corresponding quarter last year. Revenue from operations rose 24% YoY to Rs 2,795 crore, from Rs 2,261 crore a year earlier.
Operating performance also remained encouraging. EBITDA stood at Rs 354 crore, while the EBITDA margin improved for the third consecutive quarter, rising to 12.5%, up 140 basis points YoY and 170 basis points sequentially.
Home textiles lead growth
Welspun Living’s core home-textile business remained the key growth engine. Home textile exports grew 28.1% YoY, supported by improving demand across key markets.
The company reported more than 20% growth in the UK and Europe, while its US pillow business expanded 2.3 times year-on-year in Q1 and remains on track to double revenue in FY27.
The domestic business also maintained its strong momentum, growing nearly 21.3% YoY, aided by deeper household penetration of the company’s brands. Global brands continued to perform well, contributing around 12% of overall revenue, with Christy maintaining double-digit growth.
Meanwhile, flooring margins improved to 10.4%, despite softer exports, reflecting tighter operational discipline. Innovation-led products accounted for approximately 25% of the business, highlighting the company’s growing focus on differentiated offerings.
JM Financial maintains BUY
JM Financial remains bullish on Welspun Living, maintaining its ‘Buy’ rating after the company delivered a stronger-than-expected Q1FY27 performance. The brokerage noted that consolidated EBITDA came in at Rs 320 crore, ahead of its estimate of Rs 280 crore, supported by better operating leverage and an improved product mix. EBITDA margin expanded by 151 basis points YoY to 11.5%.
Looking ahead, JM Financial expects capacity utilisation across segments to remain above 80% in FY27, supporting further operating leverage. The brokerage highlighted the US pillow business, which is on track to double revenue to around $60 million, while the UK business is expected to sustain double-digit growth, aided by the India-UK FTA and strong customer relationships. Flooring margins are also expected to remain above 10%.
While elevated raw-material costs could keep gross margins range-bound in the near term, JM Financial expects the impact of the Vapi floods to be largely limited to Q2FY27, with operations normalising thereafter. It sees improving utilisation, structural cost efficiencies, greater diversification beyond the US and a recovery in core margins as key catalysts for earnings growth.
Motilal Oswal sees further upside
Brokerage firm Motilal Oswal Financial Services has reiterated its ‘Buy’ rating on Welspun Living with a target price of Rs 215, implying further upside from current levels.
Motilal Oswal expects Welspun to sustain double-digit revenue growth as home-textile volumes recover, with EBITDA margins expanding towards 13% on an improving business mix and recovery in flooring margins. The brokerage sees the core home-textile business growing at a 15% CAGR between FY26 and FY28, led by high-teens growth in Bath, followed by Bed and Rugs & Carpets, while the emerging business is projected to grow around 17%.
According to the brokerage, gross margin declined by 246 basis points YoY to 45.2% due to higher raw material costs; EBITDA margin improved to 11.5%, supported by volume recovery, a better business mix, and cost-saving initiatives.
Overall, Motilal Oswal estimates a 15% revenue CAGR, 44% EBITDA CAGR and 101% PAT CAGR over FY26-FY28, led primarily by the emerging business and the home-textile portfolio.
The brokerage, however, flagged a near-term challenge at Welspun’s Vapi facility, where operations were affected by floods. The plant is being restored in phases, with Q2FY27 expected to be impacted by the closure, while a stronger recovery is anticipated in the second half of FY27.
Despite the temporary disruption, Motilal Oswal has raised its earnings estimates, citing better visibility on growth and margins. It has valued the stock at 12x FY28E EV/EBITDA and retained its Rs 215 target price.
Key risks highlighted by the brokerage include customer and geographical concentration as well as fluctuations in commodity prices.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times.)
