Welspun Living’s Shares Surge 11% After Impressive 85% YoY Profit Growth—Is It Time to Buy, Sell, or Hold?
Welspun Living’s share price experienced a significant surge of 10.56% to Rs 176.70 during Friday’s trading session, following an impressive quarterly performance for Q1FY27. The company reported a remarkable 85% year-on-year increase in consolidated profit, reaching Rs 161 crore, compared to Rs 87 crore in the same quarter of the previous year. Revenue from operations also demonstrated robust growth, rising 24% YoY to Rs 2,795 crore. The operating metrics continued to improve, with EBITDA standing at Rs 354 crore and a traction in EBITDA margins, which improved for the third consecutive quarter to 12.5%, a gain of 140 basis points YoY and 170 basis points sequentially.
The core home-textile segment emerged as the primary driver of this growth, exemplified by a 28.1% increase in home textile exports, supported by heightened demand in key markets. Notably, the UK and European markets saw over 20% growth, while the company’s U.S. pillow business expanded 2.3 times YoY. The domestic market also registered nearly 21.3% growth, principally due to deeper household penetration. Furthermore, innovative product lines composed approximately 25% of total business revenue, indicating the company’s strategic focus on differentiation amidst competitive pressures.
In light of these positive performance indicators, Motilal Oswal Financial Services has reiterated its ‘Buy’ rating with a target price of Rs 215, suggesting further potential upside. The brokerage anticipates sustainable double-digit revenue growth fueled by a recovery in home-textile volumes and an ideal business mix that could propel EBITDA margins towards 13%. Over the FY26-FY28 period, they project a 15% CAGR for the core home-textile business and 17% for emerging segments, with a significant overall estimated 15% CAGR in revenue, alongside a 44% CAGR in EBITDA and a 101% CAGR in profit after tax, underscoring a robust growth trajectory.
However, risks remain, particularly concerning operational disruptions from flooding at the Vapi facility, which will impact Q2FY27. Despite this near-term challenge, the brokerage has revised its earnings estimates upwards, citing improved clarity on growth and margin recoveries. They caution, however, about risks linked to customer and geographical concentration and volatility in commodity prices, which could affect longer-term performance. Thus, while the fundamentals appear strong for Welspun Living, investors are advised to remain vigilant regarding these external pressures.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)