Buy Welspun India; tgt Rs 140: DSP ML
DSP Merrill Lynch has recommended buy rating on Welspun India in its December 12, 2007 report. “We have raised our PO on Welspun India to Rs 140 (Rs 93 earlier) by rolling over to FY09 and pegging it at 7.5x EV/E, which is in-line with the historic trend. We believe the company is making the right moves in a tough operating environment created by stronger Re, through its attempts to de-risk the business model and move up the value chain. Valuations remain attractive at 9.5x FY09 PE. Welspun’s earnings are highly sensitive to appreciating Re. However, given that Welspun accounts for almost 10% of total US towel imports, does give the company some pricing power. We have tweaked our Re assumptions in line with our Economist’s forecast and consequently our earnings. We now expect EPS to grow avg. 30% over FY08-10E. Maintain Buy on attractive valuations, ” according to DSP Merrill Lynch.
