Broker’s Call: Indo Count Industries (Buy)

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Target: 250 rupees

CMP: INR 193.45

Indo Count Industries Ltd (ICIL) recorded a growth of 23.4 per cent in its consolidated revenue at Rs.807 crore in Q4FY13 as against Rs.653.8 crore in Q4FY22. In terms of volume, the company’s turnover grew by 15.9% in Q4FY13. Fiscal year 2013 at 20.4 million meters, compared to 17.6 million meters in the corresponding quarter of fiscal year 22.

In terms of operating performance, the company’s operating margins were 17.9 per cent at Rs.144.2 crore in Q4FY23 versus 14.6 per cent at Rs.97.7 crore in Q4FY22, which is an improvement of 324 basis points. The company’s after-tax profit margins were 11.4 per cent at INR 91.9 crore in the fourth quarter of FY23 (7.5 per cent at INR 48.8 crore). The improvement in margins is due to better realization and better utilization.

In terms of value-added businesses, the share in sales of branded, fashion, e-commerce, and domestic home textile businesses were 14 percent, 19 percent, 10 percent, and 2.5 percent, respectively, for FY23. E-commerce and domestic home textile businesses recorded an increase in share by 300 and 50 basis points, respectively, and the total value-added business share increased to 45.5 percent in FY23 versus FY22. The company continues to strive to increase the value-added share of revenue.

With raw material prices slowing, supply chain issues fading away and returning to normal life along with an improved demand outlook bodes well for the company in the medium term. Also, with the completion of capex, the company is set to increase utilization levels in the next quarter which will help improve margins. The company’s net debt levels are also comfortable and are on a downward trajectory. We believe ICIL is well positioned to seize the opportunity on the back of a sound balance sheet, financial prudence and focused approach. We have updated our estimates on the company and maintain our Buy rating on the stock with adjusted target price of INR 250 per share.