MOSL: INDO COUNT INDUSTRIES (Neutral)-Muted quarter-falling cotton prices to ease pressure
​Indo Count Industries: Muted quarter; falling cotton prices to ease pressure
(ICNT IN, Mkt Cap USD0.3b, CMP INR120, TP INR128, 7% Upside, Neutral)
- Results below expectations, margins contract 580bp: Overall revenue declined 14.5% YoY to INR4,928m (est. of INR5,763m) in 2QFY18. EBITDA margin shrunk 580bp YoY to 14.4% (est. of 17.1%), as the gross margin contracted 260bp YoY to 43.9%. Employee cost also increased 70bp YoY to 5.6% of net sales. EBITDA declined 39% YoY to INR711m (est. of INR986m). Accordingly, adj. PAT fell 42.8% YoY to INR359m (est. of INR517m).
- Easing cotton prices – a silver lining amid policy headwinds: 2QFY18 witnessed increased pressure on margins on account of a rise in raw material cost by 260bp. Also, the GoI revised the duty drawback rate from 7.5% to 2%, and the ROSL rate from 3.9% to 1.55%, which is expected to result in margin erosion of ~250bp. However, cotton prices have started to correct (-10% to INR38,000 per candy) compared to last procurement by the company, the benefit of which is expected to be visible from 4QFY17.
- Value-added product contribution increasing: The company’s continuous focus on institutional and fashion bedding has resulted in an increase in its contribution to 13% of revenues in 1HFY18 v/s ~10% in 1HFY17. Further, the company plans to invest ~INR3b in weaving in specialized looms in order to aid growth in fashion bedding. With the planned venture into new product categories and expansion in relatively untapped geographies, the contribution of high-margin institutional and fashion bedding is expected to cross 20% of overall revenue by FY20.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.