The results were tad below expectations on topline front but was more or less compensated by the continued momentum in bottom line.
Reason for just 4% growth in top line was mainly due to capacity constraints – full year top line growth guidance of mid teens ~15% is maintained (implying higher growth in second half). Also, this ~15% growth is not for this year, but for next 4-5 years. If one goes back and read previous conf call transcripts – management have always maintained that they see mid teens growth for next many years. They don’t want to guide for a year or few quarters – they want to guide whats sustainable. Also, they don’t want to expand and wait for demand – would rather want demand to chase capacity (indirectly hinted towards Trident who have possibly done huge capex in Towels and have supposedly idle capacity)
Important points in call –
TPP will have no impact on Welspun (this was mentioned in Q1 call as well)
TUF loans – ~80% of capex have TUF benefits and will continue to have benefits till these loans are paid off. Thus the noise on TUF being taken back wont impact Welspun.
Current levels of debt are almost peak levels – may be 100cr here and there. From next year onwards debt levels would fall.
Overall, their target is to reach $2.5bn in revenue by 2020 (implying >20% CAGR in revenue), however Mr. Rajesh Mandawewala suggested to base expectations/forecast on the basis of ~15% CAGR in revenue for time being. He suggested company is doing many exciting stuff and will disclose at appropriate time the new avenues/segments of growth.
Dividend – it will be 25% of standalone profit.
Overall, it was very good conf call. Don’t see any reason why Welspun should trade at discount to its peers – given the visibility and leading position they have in industry.
Disc: Invested
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