Welspun India Ltd’s revenue declined by 14.3% yoy to Rs1,506cr in Q4FY18, however it grew by 7.7% qoq. EBITDA came in at Rs264cr, down 31.2% yoy and up 4.4% qoq. EBITDA margin contracted by 429bps yoy and 55bps qoq. Company’s adjusted Net profit stood at Rs89.9cr, down 41.6% yoy and up 13% qoq.
• The 14.3% yoy decline in the revenue is on account of a volume decline due to customer destocking coupled with GST impact on duty drawback.
• The sequential sales improvement is on the back of higher volume growth.
• EBITDA margins were impacted by lower volumes as well as higher raw material costs.
• Net debt stood at Rs3,026.9cr at FY18 end (Rs3,038.9cr at FY17 end) implying a net debt to equity of 1.16x (1.27x at FY17 end).
• FY19E capex is expected to be Rs900cr, including part of the investment for the flooring project.
• Board has approved the shifting of the proposed flooring facility from Gujarat to Telangana. The expected investment is Rs1,100cr with a capacity of 27mn sq metres p.a. Commercial production is expected to start during Q3FY20.
Con Call Highlights
• Q1FY19E revenue growth is expected to remain muted owing to base effect as tax rates in pre GST era were higher.
• From Q2FY19E onwards, the revenue growth is expected be in double digit.
• 8-10% full year revenue guidance is pre dominantly volume driven.
• Any currency fluctuation is not expected to affect FY19E profitability, as 60% of the exposure is hedged and benefit from rest 40% open exposure will be offset by higher raw material prices.
• For FY18, Plant utilisation stood at 80% for Towels and Sheets facilities. For Rugs, it stood at 65%.
• As per the Management, entire flooring market size is between Rs30,000cr to Rs50,000cr.
• Slowdown of business in FY18 is on account of online competition, Egyptian cotton issue, de-stocking and reduction in incentives.
• Company expects to become debt free by FY23E vs. earlier guidance of FY20E. This is owing to the capex planned.
• FY19E net debt will be maintained at the current level.
Welspun India Ltd ended at Rs. 64.95, up by 0.15 points or 0.23% from its previous closing of Rs. 64.80 on the BSE.
The scrip opened at Rs. 63.90 and touched a high and low of Rs. 66.80 and Rs. 63.40 respectively. A total of 24,13,146 (NSE+BSE) shares were traded on the counter. The stock traded below its 200 DMA.
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