Stock Tales - Indo Count Industries - ICICI Direct

Incorporated in 1988, Indo Count (ICIL) is one of India's largest home textile manufacturers and exporters with an extensive product range that spans across bed sheets, quilts and bed linen. The company exports to nearly 54 countries with US being the prime market (~75% of revenues, commanding ~20%+ market share in bed sheet segment exports to US). Indo Count is an integrated bedding solution provider, boasting capacity of 90 million metre per annum of dyeing/processing and cutting/sewing. Indo Count being the preferred vendor for global big box retailers (present in top nine out of 10 top big box retailers in the US) appears well poised to attain sustainable growth and market share gains, going forward.

Investment rationale

Brownfield capex to capture demand uptrend, fuel revenue growth

With 'home' assuming centre stage, demand for home textile products significantly surged globally. Accelerated quarterly volume run rate (from 14 to 21-23 mn metre) has resulted in the company operating at near optimum utilisation levels in FY21. Also, significant improvement in order book visibility has led the company to incur brownfield capex of Rs. 150 crore to enhance its capacity by 20% to 108 million metre along with Rs. 50 crore capex for modernising its yarn manufacturing units to enhance captive consumption (currently 30%). With a total capex of Rs. 200 crore the company is expecting to generate Rs. 600 crore of incremental revenues (asset turnover of 3x), which would fuel its revenue growth, going ahead.

Focus on new value added categories to broaden revenue stream

In FY16, ICIL forayed into 'top of the bed' categories, which is currently dominated by China (85% market share) owing to China's strong positioning in the MMF market. The foray into top of the bed category would lead to ICIL vying for gaining market share in a much larger target market, which is ~3x the current bed sheet industry (~US$ 10 billion). ICIL's diverse product bouquet, focus on innovation and strong distribution capabilities and long standing relationship with global brands would enable it to benefit from China plus one strategy of global retailers and garner higher share in global markets. We expect the share from higher margin top of the bed category to increase over the next few years, which would aid in improving ICIL's margin profile.

For details, click on the link below: Link to the report

Shares of INDO COUNT INDUSTRIES LTD. was last trading in BSE at Rs.172.35 as compared to the previous close of Rs. 169.7. The total number of shares traded during the day was 64246 in over 1147 trades.

The stock hit an intraday high of Rs. 176 and intraday low of 170.9. The net turnover during the day was Rs. 11117504.

Source : Equity Bulls

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