Two speeds in one company

The call and the levels

First, the trade. Motilal Oswal keeps its BUY and pegs fair value at Rs 550 a share on 15 times FY28 estimated EV/EBITDA, some 41 percent above the ruling Rs 391. The scrip has swung between Rs 217 and Rs 464 over the past year, so the target sits well above the recent high — an aggressive stance that leans on a projected 90 percent compound growth in profit through FY28 rather than mere mean-reversion.

New business: the 198 percent rocket

The emerging portfolio — utility bedding and a US branded line — is the fulcrum of the thesis. Revenue nearly tripled over the year and now accounts for 32 percent of the total, with utility bedding running at 60-to-65 percent of capacity. Management reiterated a FY27 target of Rs 1,500 crore from the new lines, within which the US branded business should deliver roughly Rs 500 crore this year and carries a three-year aspiration of about Rs 890 crore in dollar-denominated sales. Because these products still sit in a gestation phase, their margins are below the group average today; management targets a utility-bedding margin near 15 percent as volumes mature, with the branded business pitched a further 100 to 200 basis points higher.

Core business: a stumble, not a stall

The legacy bed-linen operation had a forgettable quarter, but for reasons the brokerage reads as transient. Volumes slipped 3 percent to about 2.3 crore metres as a shortage of shipping containers — a knock-on of the West Asia crisis — throttled dispatches, a problem that lingered into the second quarter. Realisation rose 3 percent from a year earlier but fell 9 percent sequentially on an unfavourable product mix warped by tariff-related uncertainty. Critically, management reported no loss of customers or orders and stood by full-year guidance of 10.5 to 11 crore metres and Rs 4,000 crore of core revenue. With the first quarter seasonally the weakest and the second and third quarters historically the strongest on US festive demand, the calendar itself argues for a rebound.

Margins climbing toward the mid-teens ambition

Profitability is quietly compounding beneath the volume noise. Gross margin expanded 170 basis points to 55.3 percent, and EBITDA grew 29 percent to about Rs 140 crore at an 11.9 percent margin, up 30 basis points, as operating leverage from the new business kicked in. Management is steering toward a consolidated EBITDA margin near 13 percent for FY27 — the brokerage models 13 to 14 percent — and holds a long-term aspiration of 15 to 16 percent, contingent on rising utilisation in utility bedding and the ramp of the branded line. Raw-material inflation from recent geopolitical tension is being passed through case by case, with rupee realisations expected to firm from the second quarter.

Earnings trajectory and the valuation case

The model traces a steep climb off a soft base. Motilal Oswal expects revenue rising from Rs 4,140 crore in FY26 to Rs 6,080 crore in FY28, EBITDA nearly doubling to Rs 830 crore, and adjusted profit vaulting from Rs 130 crore to Rs 460 crore — compound growth of roughly 21 percent, 45 percent and 90 percent respectively. Return on equity is seen tripling to 16.5 percent. On those numbers the stock trades at about 17 times FY28 earnings and 11 times forward EV/EBITDA; the brokerage applies a 15-times multiple to FY28 operating profit for its Rs 550 target — a premium justified, in its telling, by the new engine's momentum.

Risks to keep in view