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.