Since I could not find any dedicated thread on Indocount, I am posting my AR notes here.
The AR is HUGE. Lots of info. Here goes.
*Expanding into newer geographies like UK, Australia, Middle East, Japan & EU.
*Focused on inventory management whereby our company tracks the client’s inventory to keep goods at optimal levels.
*Aims to increase share of high margin bed linens from 5% to 25% in next 2 years.
*Have patented technology for bed sheets (Which explains their earnings growth and moat. This could keep rising. This is not a commodity player like Nitin).
*Company is focused on maintaining growth and increasing ROA in coming quarters.
On capacity expansion-
*The company was working at near optimal capacity levels during the year. Hence the company has undertaken capex which would increase capacity by nearly 50% (from 45mln mt to 68mln mts). The additional capacity is available in this year and we shall see improved results over the coming year.
*Promoter shareholding rose from 54.33% to 58.95% over the last 12 months.
*Cash from operating activities remains strong at 197crs Vs 102crs YoY.
*85crs spent on capex (fixed assets and capital advances).
***Conclusion- The company is in a good position. New capex has been completed and it will reflect in FY16 revenues and PAT (only issue is that they have not mentioned or given a topline and PAT guidance post new capex). If we assume a 50% capex should atleast result in 25-30% growth (conservatively), then also we should be very happy.
The AR certainly says that they expect growth they way they are opening sales offices across the world. Also their patents and relationships with major US retailers should help them sign new clients.
Disclosure - Holding Indocount since a long time. Vested interest.
Yeah, the company has increased capacity recently by 50% to 68mln mtrs/p.a after exhausting the last capex of 33% to 45mln mts/p.a. They have also opened sales offices in Japan, EU, UK, Australia and the Middle East which is aiding new sales. Even offtake from current clients is increasing. Net debt is lower. Also, they have patents for their main product which has given them some kind of moat apart from general favourable Indian textile industry tailwinds.
Indocount is no more a commodity player. Its now a proper high value product company with loads of entry barriers.
Also, their debt is under TUF just like Nitin Spinners which reduces the interest cost to 6%-7% approx (huge savings).
Company has one of the highest asset turnovers in the entire textiles industry.
Management is saying FY15 wasnt one off and they expect growth to continue strongly in Fy16. They will utilize atleast half of the new capacity added recently this year. The company is perfectly poised.
I am from kolhapur & happen to be an immediate neighbor of Indo Count plant at Gokul Shirgaon Industrial Estate.I often wonder how i could miss such a huge opportunity by not following it until lately, although i have been witnessing its growth for a last few years now.
One thing I can assure you is that there is no kind of ill treatment or bonded labor.
Although they have their share of labor union issue turning its heads up when their payment increments are negotiated.
Some scuttle butting revealed that Permanent Labour has salary well above average that is paid in our industrial area.Their new unit in Kagal 5 star MIDC industrial estate, which is very near to this plant also has similar pay.
With such large workforce its quite obvious to expect, union being formed and they having tussle with management over pay rise.I would assume this comes as a part and parcel of having to deal with such a large number of work force and ALL other textile companies should have such risks looming over.
Indo Count AGM is on 22 August. Please guide me about what questions should be asked as this will be the first time I’ll be attending any AGM.
Hi Hiramb and other friends , something I could not understand - the long term debt as shown in latest q1 fy 16 presentation shows 73 cr and short term debt at 209 cr . Even if we assume total 300 cr debt at max 11% , not considering the tuf lower rate , then interest should be 33 cr annually and 8 cr odd for the quarter , wherein company has shown about 15 cr as finance charges . Even if we take last year debt at total 362 cr , then interst should be max 40 cr whereas their total finance charge is 62 cr ?? Could not understand this , can somebody throw light on this and if I am missing something . Normally exporters borrow in foreign currency and maximum interest rate should be 6/7 % and here is upwards of 15%?
The revenue share from various segments was mentioned in reports that I head read about this company but there was no mention on the B2B and B2C split. This comprehensive report by Motilal Oswal (http://www.researchbytes.com/Indo-Count-Industries-Limited-I0159.htm) clearly mentions that the revenue split is:
81% - bedding
16% - spinning and
3% - consumer goods and that going ahead they are focusing more on the bedding business and its various verticals.
Its major customers are Walmart, JC Penny and Bed,Bath and Beyond. Also its top ten customers contribute to 50% of the revenues (from the Key Risks page of the same report), so I think it is safe to assume that it is currently working as a B2B type company until their direct outlets have a large chunk of the overall business.
@amitnagar If you have data on the B2B and B2C split then please share the same.
Disc: Not invested in this company. Currently tracking it. I request others to kindly mention if they are invested in this company in their replies (at least in the first reply) so that other readers may take that into consideration while reading your posts.
Sales growth : 25%
Profit Growth : 55%
Current valuation : 18.7 P/E Very much reasonable compare to Nifty P/E even
Updates from management :
The Board has approved Expansion of Phase 1 wherein the Capacity will be expanded from 68 million meters to 90 million meters. The total Capital Expenditure will be Rs. 175 Crores. The Phase 1 will be completed within 12 -15 months and the same will be funded through internal accruals and debt.
The Board has also given accent to Explore the Expansion of Phase 2 and the estimated project cost would be in the region of Rs. 300 crores.
Entry in Domestic Business : The Board has approved venturing in Domestic Business to create Home Textile Brands. The Total Capital expenditure over next 2 years is expected to be Rs. 25 Crores. The entry in domestic business will be done through a separate subsidiary of Indo Count.
Revenues up 21% YoY
Ebitda & EPS up 55% YoY.
Debt down to 217cr from 267cr YoY.
Company is migrating to higher value added products like Bed linens.
Company is focusing on increasing client base.
Global home textiles market is expected to grow 15% over next 2-3 years.
Mission of the company is to become Debt free.
No shares are pledged now.
475cr expansion over 2 phases.
*Phase 1 expansion is 175crs which will be completed by December 2016.
*Phase 2 expansion is approx 300crs which will be completed over 3 years (very nice to know).
Plans to enter domestic industry too.
Conclusion - Very measured approach. Co is in a sweet spot at the moment, lets hold it.