WELSPUN INDIA LIMITED
CMP: 131.95
Target Price: 152
Upside: 15%
VALUE PARAMETERS
  • Face Value (Rs.) 1.00
  • 52 Week High/Low 145.45/41.50
  • M.Cap (Rs. in Cr.) 13257.35
  • EPS (Rs.) 7.05
  • P/E Ratio (times) 18.72
  • P/B Ratio (times) 3.64
  • Dividend Yield (%) 0.11
  • Stock Exchange BSE
SHAREHOLDING PATTERN
P/B Chart
FINANCIAL PERFORMANCE

Investment Rationale

  • Welspun India Ltd (WIL) is a global leader in Home textiles. With a distribution network in more than 50 countries and world class manufacturing facilities in India, Welspun is strategic partners with top global retailers. The company is driven by its differentiation strategy based on Branding, Innovation and Sustainability.
  • According to the management of the company, the strong growth momentum which started in H2 of last FY21 continued in current fiscal year too. Moreover, the company is well placed to capture the growth opportunity on the back of strong customer relationships, superior distribution network, thriving global ecommerce channel and brands and digitalization. Identifying these opportunities well in advance, the company has deployed capital in businesses which has helped it to withstand disruptions and would generate strong growth in future.
  • The capital light expansion at Vapi and Anjar is on track and the benefits from this investment will start accruing in phases from the Q2 FY22. The company also plans to gradually expand the home textiles capacity to grab large opportunities in home textile exports. Company’s flooring products are not only gaining strong traction in the domestic market but also getting higher export enquiries from international market.
  • Greenfield Spunlace Capacity addition project in Telangana is on course and the company expect commercial operation to commence from H2 FY22. Hard flooring capacity doubled in January. The company has been focusing on brands to tap the underpenetrated domestic market, which is being catered by unorganised players.
  • On a segmental basis, bath linen sales volume grew 51% Y-o-Y (year-on-year), bed linen sales volume soared 114% Y-o-Y and rugs and carpets sales volume climbed 219% Y-o-Y. Consolidated EBITDA grew 93.1% to Rs 459.80 crore in Q1 FY22 as against Rs 238.10 crore in Q1 FY21. EBITDA margin improved to 20.6% during the quarter as compared to 19.6% during Q1 June 2020.
  • Net debt reduced by Rs 83.20 crore to Rs 2,249.50 crore in Q1 June 2021 over Rs 2,332.70 crore in March 2021. Excluding flooring, net debt stood reduced by Rs 137.60 crore to Rs 1,483.90 crore as against Rs 1,621.50 crore in March 2021. In Q1 FY22, Welspun India spent Rs 172.20 crore.

Risk

  • Slowdown in Economy
  • Any large debt-funded capex/inorganic acquisition, decline in liquidity buffers and/or a significant reduction in profitability.

Valuation

The Company remains committed in its long-term aspiration of delivering sustainable and profitable volume led growth, building on strong brand equity and accelerated focus on emerging businesses and implement of government’s PLI scheme for textile sector. Despite a strong capex plan to support growth in key segments, net debt is expected to remain at Rs. 2,400 crore as large capex funding will be done by improving cash flows. It is expected that the stock will see a price target of Rs.152 in 8 to 10 months’ time frame on current P/BVx of 3.64x and FY22 BVPS of Rs.41.85.

SUNTECK REALTY LIMITED
CMP: 381.25
Target Price: 435
Upside: 14%
VALUE PARAMETERS
  • Face Value (Rs.) 1.00
  • 52 Week High/Low 414.95/210.00
  • M.Cap (Rs. in Cr.) 5581.29
  • EPS (Rs.) 3.72
  • P/E Ratio (times) 102.49
  • P/B Ratio (times) 2.01
  • Dividend Yield (%) 0.39
  • Stock Exchange BSE
SHAREHOLDING PATTERN
P/B Chart
FINANCIAL PERFORMANCE

Investment Rationale

  • Sunteck Realty Limited (SRL) is one of the fastest growing Mumbai-based luxury real estate development companies. SRL has an immaculate track record of having one of the lowest net Debt/Equity ratios, financial prudency and sustainable growth. The company focuses on a city centric development portfolio of about 38 million square feet spread across 19 projects.
  • In both the completed as well as ongoing projects category, the company has been able to sell more than 80% of the total inventory available. The balance inventory will provide estimated revenue potential of Rs 31 bn (Rs 3,100 cr) in the 3-4 years.
  • The upcoming and future projects in the middleincome and affordable segment will provide additional revenue potential of Rs 130 bn over various phases to be launched. The receivables from the sold inventory of Rs 14 bn (Rs 1,400 cr) shall be recovered as the projects gets completed.
  • The company's sales bookings stood at Rs 101 crore in the year-ago period. It collections also grew by 165 per cent to Rs 172 crore and Bookings for the period increased 74 per cent to Rs 176 crore.
  • According to the management, the real estate industry is witnessing strong consolidation and the company is one of the key beneficiaries of this trend as it has already resulted in 3 new project acquisitions by the developer at Vasai, Vasind and Borivali in Mumbai region.
  • Going forward, the company expects to leverage its brand franchise and management expertise to continue to evaluate new growth opportunities and thereby increase its overall market share.
  • During the quarter, the company has generated a gross operating surplus cash flow of Rs 32 crore that has helped the company sustain a low net debt-equity ratio.

Risk

  • Working capital intensive nature of business
  • Economic Slowdown

Valuation

In this transformational environment, management remains focused on the execution of existing portfolio – reflected in construction and collection progress of various projects. The company’s continued strong momentum in operational performance. Both pre-sales and collections witnessed sturdy growth along with high collections efficiency. Moreover its balance sheet strength, established track record and operational cash flow visibility will continue to provide strength to the company. Thus, it is expected that the stock will see a price target of Rs.435 in 8 to 10 months’ time frame on target P/BV of 2.10x and FY22 BVPS of Rs.207.26.


Above calls are published in “Wise Money Issue No. 801”

E-mail: smc.care@smcindiaonline.com

SMC Global Securities Ltd. (hereinafter referred to as “SMC”) is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and its associate is member of MCX stock Exchange Limited. It is also registered as a Depository Participant with CDSL and NSDL. Its associates merchant banker and Portfolio Manager are registered with SEBI and NBFC registered with RBI. It also has registration with AMFI as a Mutual Fund Distributor.

SMC is a SEBIregistered Research Analyst having registration number INH100001849. SMC or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities market.

SMC or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst. SMC or its associates and relatives does not have any material conflict of interest. SMC or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. The subject company has not been a client of SMC during the past twelve months. SMC or its associates has not received any compensation or other benefits from the company covered by analyst or third party in connection with the research report. The Analyst has not served as an officer, director or employee of company covered by Analyst and SMC has not been engaged in market making activity of the company covered by Analyst.

The views expressed are based solely on information available publicly available/internal data/ other reliable sources believed to be true.

SMC does not represent/ provide any warranty express or implied to the accuracy, contents or views expressed herein and investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

DISCLAIMER: This report is for informational purpose only and contains information, opinion, material obtained from reliable sources and every effort has been made to avoid errors and omissions and is not to be construed as an advice or an offer to act on views expressed therein or an offer to buy and/or sell any securities or related financial instruments, SMC, its employees and its group companies shall not be responsible and/or liable to anyone for any direct or consequential use of the contents thereof. Reproduction of the contents of this report in any form or by any means without prior written permission of the SMC is prohibited. Please note that we and our affiliates, officers, directors and employees, including person involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) may trade in this securities in ways different from those discussed in this report or (c) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instrument of the company (ies) discussed herein or may perform or seek to perform investment banking services for such Company (ies) or act as advisor or lender / borrower to such company (ies) or have other potential conflict of interest with respect of any recommendation and related information and opinions, All disputes shall be subject to the exclusive jurisdiction or Delhi High Court.