The brokerage’s perspective on Welspun India
Axis Securities, in its research report, said that “Indian textile companies would benefit from the ‘China +1’ strategy, global players reduce their dependence on China to reduce the risk of concentration in their chain. supply, various labor human rights violations associated with the textile industry in the Xinjiang region which led to the ban on cotton from Xinjiang (20% of world cotton production) to states United, the trade tensions between the United States and China, etc. sourcing destinations, this change is known as the “China + 1” initiative. government political support.
According to the brokerage firm, “This will help Indian T&A exporters gain a share of their Chinese counterparts in the world. Further potential removal of Pakistan’s General System of Preferences (GSP) status with the EU. GSP status in the EU allows duty-free access, helping it gain significant market share against India and China which attract ~ 10% tariffs. However, the European Parliament is considering the withdrawal of GSP status of Pakistan to combat the abuse of blasphemy laws in the country, providing additional growth room for the Indian textile industry. “
In its research report, the brokerage also claimed that “the company is the largest home textile player in the country as well as one of India’s largest exporters of home textile products (HT) with a share of around 45% in global HT exports. The company also has around 20% market share in the HT market in the United States. The advent of Covid-19 has brought about fundamental changes in consumer behavior, leading to the emergence of a new trend – “home economics”, which has shown an increase in consumer spending for home comfort products . This catalyzed the adoption of the electronic commerce route. We also expect increased pent-up demand in the US and EU as well as the domestic market driven by the economic unlock and the coming festive seasons. in the hospitality industry will also increase the demand for HT products. “
Axis Securities further underlined that “With the cumulative experience of the traditional portfolio and existing relationships with various distributors, Welspun got into Flooring. The company has already entered into a long-term strategic agreement with one of America’s largest distributors of hard products. flooring and the product is well received in other international markets. The segment at its peak is expected to add Rs 2200 to 2500 Cr to the WIL topline.
Buy Welspun India suggests Axis Securities
According to the brokerage firm’s appeal, “the bed and bath linen business and the new segment of flooring products are expected to be the main growth drivers going forward. We believe Welspun is well positioned in the HT space given i) strong industry growth levers; ii) Long-term, well-established relationships with customers, and iii) strong brand presence auguring e-commerce and B2C channels. The growth of the new flooring business looks promising. At CMP, the stock is trading at 18 times the BPA FY22E. We assign a target multiple of 15x FY23E EPS (i.e. with a 20% discount on the TTM PE) and initiate a hedge with a BUY rating with a target price of Rs 173 / share, which implies an increase of 23%. “
The stock was selected in the Axis Securities brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.