Welspun Living Ltd. experienced a notable surge in its share price on Thursday, climbing over 5% after global brokerage Jefferies reaffirmed its 'Buy' rating on the textile company's stock. The firm also maintained a target price of Rs 260, indicating a potential upside of 14% from the reference price of Rs 227.60.
The stock opened at Rs 226.95 and reached an intraday high of Rs 245, marking a 7.65% increase from its previous close. It ultimately settled at Rs 239.05, up 5.03% on the BSE.
Growth Drivers and Market Opportunities
Jefferies highlighted several factors expected to bolster Welspun Living's growth trajectory. These include the easing of US tariff uncertainties, strategic diversification of sourcing away from China, and new market opportunities emerging from potential trade agreements with the UK and the European Union. The extension of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme for textile exporters until December 2026 is also seen as providing crucial support to Indian companies like Welspun Living.
Financial Projections and Margin Improvement
The brokerage anticipates strong financial performance for Welspun Living in the coming years. Revenue is projected to grow at a Compound Annual Growth Rate (CAGR) of 14% between fiscal years FY26 and FY29. Even more impressively, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is estimated to surge at a 38% CAGR over the same period.
- Revenue growth is expected to recover to 13% in FY27, followed by 15% in FY28 and FY29.
- EBITDA growth is forecast at 64% in FY27, 27% in FY28, and 26% in FY29.
- EBITDA margins are projected to significantly improve from 8.4% in FY26 to 14.8% by FY29.
These improvements are attributed to shifts in sourcing away from China, lower cotton and freight costs, and an improving business mix.
Diversification and Market Presence
Welspun Living's strategic diversification efforts into areas such as flooring, advanced textiles, pillows, and domestic brands were also noted by Jefferies. The company's US business currently accounts for approximately 59% of its revenue, with the UK and EU markets contributing around 18%.
Valuation and Risks
Jefferies values Welspun Living at 14 times its one-year forward EV/EBITDA, a valuation placed at the higher end of its historical trading range. This reflects the company's improving growth profile, competitive positioning, and diversified revenue streams.
However, the brokerage also identified key risks, including potential prolonged weakness in US demand, adverse tariff and trade policies, volatility in raw material and cotton prices, and execution risks associated with its emerging businesses.