MOSL: INDO COUNT INDUSTRIES (Downgrade to Neutral)-Destocking woes lead to a muted quarter
​Indo Count Industries: Destocking woes lead to a muted quarter
(ICNT IN, Mkt Cap USD0.4b, CMP INR115, TP INR129, 12% Upside, Downgrade to Neutral)
- Results below estimates: ICNT's revenue declined 12.4% YoY to INR4,318m (est. of INR5,370m) in 1QFY18. EBITDA fell 41% YoY to INR653m (est. of INR1,187m), with the margin contracting 730bp YoY to 15.1% (est. of 22.1%) on account of total raw material cost rising by 250bp (part of which was reflected under other expenses, which increased by 760bp). Consequently, adj. PAT declined 47% YoY to INR320m (est. of INR666m).
- Deferred offtake on account of destocking: 1QFY18 witnessed significant deferment in offtake, leading to volume decline of 14% YoY to 12m mtrs in 1QFY18. The company also witnessed a sharp contraction of 730bp in margin on account of higher raw material cost, along with lower absorption of fixed costs. The industry is yet to witness the commencement of restocking, because of which the company has reduced its guidance of ~63m sales volume in FY18 to flattish growth (FY17 volumes stood at 56m).
- Capacity ready to leverage turnaround in cycle: INCT continues to expand its capacity (90m mtrs) with a view to capitalize on any turnaround in the business environment with the likely softening of cotton prices and commencement of restocking post GST. The season witnessed higher cotton acreage, which should drive down cotton prices. The company expects to capitalize on the opportunity to move up the value chain by adding new products, entering new geographies and thus boosting utilization.
Indo Count Industries Limited is an India-based home textile company engaged in the activity of manufacture of textile products. The Company is involved in the manufacture of bedding, quilts, pillows, sleeping bags and others, and preparation and spinning of cotton fibers, including blended cotton. The Company operates as an end-to-end bedding provider. The Company offers products under categories, including bed sheets, fashion bedding, utility bedding and institutional bedding. The Company's brands include Boutique Living, Revival, Pure Collection, NeoFresh, Haven, Thermal Balance, Touch Sense and Color Sense. The Company is a manufacturer/exporter of bed linen. The Company exports its products to approximately 50 countries in over five continents. The Company has showroom and distribution centers in the United States, the United Kingdom and Australia. It also sells products online through e-tailers. The Company has manufacturing factories located in Kolhapur, Maharashtra.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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