Investment Argument
Welspun is Asia's largest and amongst world's top four terry towel manufacturers with capacity of over 40,000 MTs with acquisition of brands like Christy, UK [Exclusive supplier to Wimbeldon Tennis championship] under its fold and global network of sales [ in 32 countries] for
Home textiles. It also has over 40 mill. Mtrs capacity for Bed Linen and small capacity of decorative beddings. Company is preferred supplier to 14 out of the top 20 world's largest retailers due to its cost, quality, innovation and designing capabilities. Recently it has demerged its subsidiaries, (unlocking its value and focusing on core business), into Welspun Global brands [which is marketing arm] and Welspun investments Ltd [which has investments and treasury].
The financials of the company give a positive outlook with Q-1 sales and earnings indicating, significant improvement in working results of current year. Cash earnings of company are very strong even last year. Another positive for the company is that it is located in tax benefits zone. Valuation wise, for Market Cap of Rs 378 Crs, one is getting company with sales of Rs 1700 Crs and cash profit of Rs 225 Crs [2010 expected]. It is discounting expected earnings by 3X and cash earnings are discounted by less then 2X. With global sustainable business, stock has potential to appreciate significantly. Increase in promoters holding by 2.1% in last quarter shows the confidence of the promoters in the company's growth potential.
Welspun is Asia's largest and amongst world's top four terry towel manufacturers with capacity of over 40,000 MTs with acquisition of brands like Christy, UK [Exclusive supplier to Wimbeldon Tennis championship] under its fold and global network of sales [ in 32 countries] for
Home textiles. It also has over 40 mill. Mtrs capacity for Bed Linen and small capacity of decorative beddings. Company is preferred supplier to 14 out of the top 20 world's largest retailers due to its cost, quality, innovation and designing capabilities. Recently it has demerged its subsidiaries, (unlocking its value and focusing on core business), into Welspun Global brands [which is marketing arm] and Welspun investments Ltd [which has investments and treasury].
The financials of the company give a positive outlook with Q-1 sales and earnings indicating, significant improvement in working results of current year. Cash earnings of company are very strong even last year. Another positive for the company is that it is located in tax benefits zone. Valuation wise, for Market Cap of Rs 378 Crs, one is getting company with sales of Rs 1700 Crs and cash profit of Rs 225 Crs [2010 expected]. It is discounting expected earnings by 3X and cash earnings are discounted by less then 2X. With global sustainable business, stock has potential to appreciate significantly. Increase in promoters holding by 2.1% in last quarter shows the confidence of the promoters in the company's growth potential.
Background
Welspun is Asia's largest and amongst world's top four Home textiles company with Towel capacity of over 40,000 MTs and Bed Linen capacity of over 40 million MTs. It also has small capacity of decorative beddings. It also acquired a company in Mexico as also in Portugal, to widen the manufacturing capacities as also to achieve wider global reach. With acquisition of brands like Christy, UK [Exclusive supplier to Wimbeldon Tennis championship] under its fold and global network of sales [ in 32 countries] for Home textiles. Company is preferred supplier to 14 out of the top 20 world's largest retailers due to its cost, quality, innovation and designing capabilities.Recently it has de-merged brands & investments in to seperate subsidiaries, (unlocking its value and focusing on core business), into Welspun Global brands [which is marketing arm] and Welspun investments Ltd [which has investments and treasury].
With Portugese acquisition, company will get access to 44 countries in US & European region, for marketing its products. Similarly Christy acquisition will bolster the branded product sales in western markets.
Welspun is Asia's largest and amongst world's top four Home textiles company with Towel capacity of over 40,000 MTs and Bed Linen capacity of over 40 million MTs. It also has small capacity of decorative beddings. It also acquired a company in Mexico as also in Portugal, to widen the manufacturing capacities as also to achieve wider global reach. With acquisition of brands like Christy, UK [Exclusive supplier to Wimbeldon Tennis championship] under its fold and global network of sales [ in 32 countries] for Home textiles. Company is preferred supplier to 14 out of the top 20 world's largest retailers due to its cost, quality, innovation and designing capabilities.Recently it has de-merged brands & investments in to seperate subsidiaries, (unlocking its value and focusing on core business), into Welspun Global brands [which is marketing arm] and Welspun investments Ltd [which has investments and treasury].
With Portugese acquisition, company will get access to 44 countries in US & European region, for marketing its products. Similarly Christy acquisition will bolster the branded product sales in western markets.
Risks and concerns
With major revenues coming from exports, the currency fluctuation risk is always there. Plus due to initial stage of global operations, resulted in to losses which is reflected in consolidated loss for last year [3/09] Sharp fluctuations in raw materials like cotton and fuel, also affects the margins, particularly if moves against gravity. Competition from other major global players from China or Pakistan may also affect margins.
Recommendation
Valuation wise, for Market Cap of Rs 378 Crs, one is getting company with sales of Rs 1700 Crs and cash profit of Rs 225 Crs [2010 expected]. With significant growth potential and sustainable global business model, it looks dam cheap. Discounting expected earnings by 3X and cash earnings are discounted by less then 2X. BUY.
Recommendation
Valuation wise, for Market Cap of Rs 378 Crs, one is getting company with sales of Rs 1700 Crs and cash profit of Rs 225 Crs [2010 expected]. With significant growth potential and sustainable global business model, it looks dam cheap. Discounting expected earnings by 3X and cash earnings are discounted by less then 2X. BUY.
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