Welspun Living Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Welspun Living Ltd (WELSPUNIND) Q2 FY24 Earnings Concall

• Revenue Growth
  • Revenue grew 19% year-on-year and 15% quarter-on-quarter to highest ever quarterly revenues of INR2,542 crores.
  • Growth driven by upcoming holiday season in US leading to increased buying from retailers.
  • Export revenues grew 22% year-on-year with innovation products growing 67%.
  • Flooring revenues grew 52% year-on-year to record revenues of INR243 crores.
• Profitability
  • Highest EBITDA of INR391 crores in last 8 quarters at 15.4%, up 158% year-on-year.
  • Flooring business saw highest ever quarterly EBITDA at 8.3%, up from 2.6% last year.
  • Profit after tax grew over 22 times year-on-year to INR197 crores.
  • EPS grew significantly to INR2.04 from INR0.08 last year.
• Market Environment
  • US showing growth despite banking crisis and rate hikes.
  • Indian market resilient but seeing inflation volatility affecting consumer purchasing power.
  • Global economic scenario expected to remain volatile.
• Expanding Distribution
  • Welspun is most widely distributed home textile brand in India, now in 600+ towns and 15,511 outlets.
  • Brand SPACES gained market share and emerged as leading brand in modern trade channel.
• Sustainability Efforts
  • Started operations of 30 MW solar power plant, 47 MW round the clock renewable energy project approved.
  • Targeting 100% renewable energy by 2030.
  • Ahead of peers globally in ESG and sustainable practices.
• Growth Outlook
  • The company is cautiously optimistic about growth of around 10-12% in revenue and 15% in EBITDA going forward.
  • Committed to this growth target and will look to debottleneck capacities if needed through small investments.
• Flooring Business Growth and Outlook
  • The flooring business saw strong orders in the US and UK this quarter.
  • These were not one-off orders but part of an ongoing trend driven by the China plus one strategy and the company’s modern manufacturing capabilities.
  • The capacity utilization and order run rate will continue going forward.
  • Company sees significant growth opportunity in flooring exports to the US.
  • Addresses $10 billion out of the $90 billion flooring market in the US, with plans to take market share from China.
• Domestic B2C Business
  • The domestic B2C textile business is now at positive EBITDA and not burning cash.
  • 9-10% of revenue continues to be invested in marketing this business.
  • Pan-India network of around 125 distributors and over 200 sales staff to supply products to multi-brand outlets.
• Impact of UK FTA
  • The UK FTA presents an opportunity given UK is 10% of home textile demand.
  • Will benefit towel and sheet exports.
  • Orders could start coming in around 6 months after FTA approval.
  • EU FTA not expected now but UK FTA is high priority.
• Capacity Expansion
  • The company is operating at 95% utilization currently. It is exploring capacity expansion based on growth trends.
  • Any capacity addition will be done prudently based on IRR and ROSI. The company sees opportunities from global shifts with countries like China.
  • Deposit repricing impact will continue over next few quarters.
• US Flooring Growth and Cotton Price Outlook
  • The significant US flooring growth is broad-based across distributors, retail and hospitality segments rather than just 1-2 large players.
  • The growth is in both hard and soft flooring. China disruptions have further boosted growth.
  • Cotton prices are seen stable around INR61,000-62,000/candy.
  • The company has 4 months of cotton inventory as buffer against volatility. It is closely tracking prices and can take appropriate steps if required.
• Home Textiles Business Performance
  • A home textiles export to the US continues to see highest ever quarterly revenues and market share.
  • Company continues to innovate with products, brands, and partnerships to maintain competitive edge.