Indo Count Industries: Stitching Together a Sustainable Future◉ Abstract
Indo Count Industries Ltd., a leading Indian home textile manufacturer, has reported significant growth, with FY24 revenue reaching ₹3,557 crore, an 18% increase year-over-year. Despite supply chain challenges and a decline in sales volume, the company remains optimistic about future growth, driven by strong demand and strategic initiatives. The company’s focus on sustainability and strategic acquisitions has further strengthened its position.
Currently trading at a P/E ratio of 20.3, below the industry average, Indo Count appears fairly valued. Increasing institutional interest indicates growing confidence in the company’s long-term potential. As Indo Count continues to prioritize operational efficiency and market expansion, its future growth prospects remain promising.
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◉ Introduction
The US bed and bath linen market is projected to experience significant growth in the coming years. As of 2024, the market size is estimated at approximately $10.73 billion, with expectations to reach $13.14 billion by 2029, reflecting a compound annual growth rate (CAGR) of 4.14% during this period.
This growth is driven by several factors, including:
1.Increased Homeownership: Rising homeownership rates are boosting demand for essential bed and bath linens like sheets and towels.
2.Consumer Spending: Higher disposable incomes are leading to increased spending on home furnishings, including premium and luxury linen products.
3.Sustainability Trends: There is a growing consumer preference for eco-friendly and sustainable products, influencing purchasing decisions in the bed and bath linen segment.
The market is characterized by a low concentration of major players, indicating a competitive landscape with numerous brands catering to various consumer preferences.
◉ Major Players in the Industry
Several key players dominate the US bed and bath linen market:
1.Indo Count Industries Ltd.: As the largest manufacturer of home textile bed linens globally, Indo Count is a significant player in the US market, known for its extensive product range and commitment to sustainability.
2.Brooklinen: This brand offers modern and luxurious bedding products, appealing to consumers seeking comfort and style.
3.Peacock Alley: Known for its premium quality and craftsmanship, Peacock Alley focuses on high-end bed and bath linens.
4.Crane & Canopy: This company provides stylish yet affordable options for a wide range of consumers.
5.Tempur Sealy International, Inc.: A leading player in the bedding industry, known for its innovative mattress solutions that complement bed linen offerings.
6.American Textile Company: Offers a variety of bedding products with a focus on quality and comfort.
Today, we'll take an in-depth look at Indo count Industries, a prominent player in the US bed linen manufacturing sector, exploring its market positioning and competitive dynamics.
This detailed report undertakes a thorough evaluation of ICIL's technical capabilities and core business fundamentals.
◉ Company Overview
Indo Count Industries Limited NSE:ICIL , established in 1988, is a leading Indian home textile manufacturer. The company offers a diverse range of products, including bed sheets, fashion bedding, utility bedding, and institutional bedding. With showrooms in the UK and US, Indo Count sells its products under 17 distinct brands through multi-brand outlets, large format stores, and e-commerce platforms. Headquartered in Mumbai, India, the company exports its products globally.
◉ Market Capitalization - ₹ 6,288 Cr.
◉ Revenue Breakup (Location Wise)
➖ With a staggering 97.5% of its revenue generated from the US and UK markets, Indo Count Industries Limited has established itself as a prominent global player in the home textile industry.
➖ The remaining 2.5% of its revenue comes from domestic Indian sales.
◉ Challenges and Headwinds:
➖ Sales volume and revenue decline YoY due to supply chain issues, leading to higher inventory.
➖ Anticipated clearance of 2.5 million meters of deferred shipments in upcoming quarters.
➖ Revised EBITDA margin guidance: 15-16% due to upfront HR and brand promotion costs
◉ Margin Guidance and Future Outlook:
➖ Despite near-term challenges, Indo Count Industries Limited's management remains upbeat, fueled by a strong demand outlook and solid market positioning.
➖ Strategic investments in branded segments are expected to yield returns within the next four years, driving improved margin guidance.
➖ To further propel growth, the company is focused on enhancing operational efficiencies and scaling up operations in high-potential segments.
◉ CAPEX
➖ Indo Count Industries Limited has revised its FY25 capital expenditure (CAPEX) upwards to ₹413 crores, a significant increase from the initial estimate of ₹165 crores, driven by strategic acquisitions and investments.
◉ Strategic Acquisitions
➖ Recent acquisitions of Fluvitex Inc. and Modern Home Textiles, enhancing U.S. manufacturing footprint.
➖ Acquisitions strengthen presence in critical U.S. regions, expanding customer base without overlapping existing clientele.
◉ Technical Aspects
➖ Over a prolonged consolidation phase, the stock price developed a Cup & Handle pattern.
➖ Following a breakout, the stock surged sharply, hitting an all-time high near the 448 level.
➖ Nevertheless, it faced significant resistance and retraced to the previously established breakout level.
➖ Currently, the price is at a crucial point that could act as an important support zone.
➖ There is strong anticipation that the stock may rebound from this level and begin to rise again.
◉ Relative Strength
The chart reveals that Indo Count Industries Limited (ICIL) has lagged behind the Nifty Small Cap Index over the past year, generating a 12.7% return compared to the index's impressive 26.3%.
◉ Revenue & Profit Analysis
● Yearly
➖ Indo Count Industries Limited reported strong growth in Fiscal Year 2024, with revenue reaching ₹3,557 crore, an 18% increase from ₹3,012 crore in FY23.
➖ EBITDA surged to ₹562 crore, up from ₹455 crore, while the EBITDA margin improved to 16% from 15%.
● Quarterly
➖ In the quarter ending September, the company's revenue rose to ₹1,036 crore, a 10% increase from ₹941 crore in the previous quarter, slightly higher than ₹1,009 crore in the same quarter last year.
➖ EBITDA for the quarter increased to ₹157 crore, up from ₹145 crore in the previous quarter.
➖ However, diluted EPS (LTM) declined to ₹15.62 in September from ₹17.27 in June 2024.
◉ Valuation
● P/E Ratio
➖ The company's present price-to-earnings (PE) ratio stands at 20.3, lower than its 1-year median PE of 21.4.
➖ When we look at the industry average PE of 26, it indicates that the stock might be considered somewhat undervalued at this time.
● P/B Ratio
➖ ICIL's P/B ratio of 2.86 indicates considerable overvaluation compared to the industry average of 1.46.
● PEG Ratio
➖ A PEG ratio of 0.49 suggests that the stock is undervalued relative to its expected earnings growth.
● Intrinsic Value
➖ Indo Count Industries is currently trading at ₹307, which is nearly 1.1 times its intrinsic value of ₹279, indicating that the stock is fairly valued at this moment.
◉ Cash Flow Analysis
➖ The operating cash flow for Indo Count Industries Limited experienced a notable decline from ₹755 crore in FY23 to ₹146 crore in FY24. This decrease can be attributed to the strategic allocation of capital towards acquiring prominent brands, such as Wamsutta, as part of the company's expansion and growth initiatives.
◉ Debt Analysis
➖ ICIL's debt of ₹1,461 crore and debt-to-equity ratio of 0.66 indicate robust financial health. Furthermore, its impressive interest coverage ratio of 5.74 suggests the company is well-positioned to manage its debt obligations, ensuring greater financial flexibility and stability.
◉ Top Shareholders
➖ The promoters have maintained their 58.74% stake for the last two years.
➖ Foreign Institutional Investors (FIIs) have maintained their stakes since June, now holding 10.69%.
➖ Domestic Institutional Investors (DIIs) have continuously increasing their stakes from June 2023 and now holding 3.67%, significantly up from 2.16% from the June quarter.
➖ At the same time, retail investors have been consistently selling their shares over the past few quarters.
**Additionally, Mukul Mahabir Agarwal , a veteran investor, places a strategic bet on Indo Count Industries Limited, acquiring 1.17% of the company's shares, a move poised to reap rewards.
◉ Mutual Fund Exposure
➖ Indo Count Industries Limited witnessed increased institutional interest in October 2024, with thirteen funds holding 70 lakh shares, representing a 9.3% rise from September's 64.1 lakh.
◉ Conclusion
Based on our analysis of key technical and financial metrics, Indo Count Industries Limited's strategic focus on diversification, acquisitions, and premium products positions the company for sustained growth and long-term value creation.
We anticipate that this positive trajectory will be reflected in its stock price performance.
