MOSL: INDO COUNT INDUSTRIES (Neutral)-Robust volumes without earnings vigor as currency/mix/RM cost haunt
Indo Count Industries: Robust volumes without earnings vigor as currency/mix/RM cost haunt; Expect continued margin pressure
(ICNT IN, Mkt Cap USD0.2b, CMP INR64, TP INR72, 13% Upside, Neutral)
- Operating performance disappointing: ICNT’s revenue declined 1.4% YoY to INR4,860m (our estimate: INR5,273m) in 2QFY19. EBITDA fell 30% YoY to INR498m (our estimate: INR770m), with the margin contracting 420bp YoY to 10.2% (our estimate: 14.6%). Adj. PAT declined 39.4% YoY to INR218m (our estimate: INR395m) in the quarter.
- 1HFY19 performance: Revenue grew by 2% YoY to INR9,429m. EBITDA declined 17% YoY to INR1,139m, with the margin contracting 270bp YoY to 12.1%. Adj. PAT declined 25% YoY to INR506m. In 2HFY19, we expect revenue growth of 11% YoY, with margin contraction of 100bp.
- Steady volume growth, but expect pressure on profitability: ICNT delivered volume growth of 9% YoY in 2QFY19 and 15% YoY in 1HFY19. The company is well on track to meet its volumes guidance of 58-60m mtrs in FY19, with 30.2m mtrs already achieved in 1HFY19. However, revenue growth and profitability were impacted in 1HFY19 on account of currency volatility (hedged at exchange rate lower than realized translation), product mix changes and raw material (RM) cost pressure. Going forward too, RM cost pressure (cotton prices at INR46k/candy v/s expectation of MSP level prices of 43-44k/candy) and currency volatility are likely to persist.
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.
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