Indo Count Industries ~ Global Home Textiles Bedding Segment Leader

Janme · August 4, 2018, 3:34pm

Indo Count’s first quarter results are published. There is a loss of 37Cr. in Other Comprehensive income with reference given as note 4.

In note 4, it has mentioned about Cash Flow hedging on derivative contracts. Does anyone knows what this exactly means?

harshitgoel · August 18, 2018, 9:11am

Indo Count Industries Ltd FY18 Annual Report Notes

At a consolidated level, the total revenue was Rs. 1,958 crores against Rs. 2,258 crores in the previous year. Net Profit was Rs. 125 crores against Rs. 232 crores in the previous year and Earning Per Share was 6.38 against 11.76 in the previous year.
Company’s EBITDA margins declined from 14.5% to 8%. Off this Gross Margins declined by 300 basis points, Other Expenses increased by 275 basis points and Employee Cost increased by 100 basis points.
The textile environment continued to be challenging in FY 2017-18 on account of multiple headwinds viz. de-stocking of inventories by US retailers, rising input cost, as well as volatility in foreign currency. While these headwinds impacted revenues, our overall performance was satisfactory. Our H2FY18 sales volumes were better than H1FY18, indicating a positive divergence that we expect will sustain going forward.
Government has reduced duty drawback rates from 7.5% to 2% and Remission of State Levies (RoSL) rate from 3.9% to 2.2%.
Cash Flow from Operations declined from Rs. 216 cr to Rs. 42 cr majorly due to increased inventory. Inventory Days increased to 115 days in FY18 from 80 days in FY17.
Remuneration paid to KMP in FY18 is Rs. 9.02 cr (In FY17 it was Rs. 18.89 cr).
The Company has an integrated manufacturing unit located at Kolhapur, Maharashtra with spinning, weaving, processing and stitching. The company has a capacity of 90mn meters per annum which co-relates to 22mn sheet sets. After second phase expansion, the weaving capacity will be 27mn meters per annum.
Second phase of capex has begun; land for the same has been finalized and is pending government notification. The project will come up in State of Maharashtra and is expected to get commercialized by the end of FY20.
The Company has two divisions viz. Home Textiles and Spinning. Nearly 90% of the Company’s revenue is derived from Home Textiles and the rest of the revenue from spinning.
The Company’s capacity of 90 million meters per annum is amongst the largest in the home textiles segment in India and among the top five in the world.
The Company possesses 80,000 spindles, providing adequate flexibility to spin yarn.
Company has ventured into the value added segment comprising of fashion, institutional and utility segment in the last two years and is continuously working towards strengthening this segment. ICIL expects the contribution from this segment to increase to around 30% in next three years from close to 13% currently.
The Company’s products are marketed in more than 54 countries. Indo Count is present in USA, UK, Australia and UAE through its international subsidiaries. Company is among top 3 bed sheet suppliers to the USA. The Company is the 11th largest global home textiles supplier to the USA, which is the largest market for it and contributes nearly 65%-70% of its export turnover.
To mitigate risk of over-dependence on USA, the company is venturing into different newer geographies like Japan, MENA , LATAM, etc. In next 3-4 years, the contribution from USA will come down and non-US markets will increase.
ICIL sells products through top retailers like Walmart, JC Penney, Target, Macys, Carrefour, etc. In addition, its products are also sold online through retailers such as Amazon under the brand Colour Sense.
Company added four brands in its brand portfolio and product basket out of which three proprietary brands were launched in the US – Heirlooms of India, Boutique Living Coastal and Atlas, in addition to a licensed brand Morris & Co.
During the year, your Company incorporated a wholly-owned subsidiary in UAE; the incorporation of a subsidiary in Germany is under process to broaden customer base.
I am pleased to state that we have scaled the presence of ‘Boutique Living’ across 21 states and 96 cities with 465 MBOs and 8 LFS stores.; besides, ‘Boutique Living’ is also available online: www.boutiquelivingindia.com and on Amazon.
“VASUNDHARA AWARD” from Maharashtra Pollution Control Board in recognition of the companies’ contribution towards the commitment & promotion of Environment, Energy Conservation / Natural Resources & Social / Welfare Activities. The Company is adjudged as the 2nd Best Company in the entire state of Maharashtra among all the large units.
CARE Ratings upgraded the Company’s credit rating for long-term debt to CARE AA ( Double AA) from CARE AA- ( Double AA minus) with negative outlook and reaffirmed the short-term credit rating at CARE A1+.

Home Textile Industry Data

India enjoys a dominant position with a market share of 50% in bed sheets and 39% in terry towels in total USA imports as of 2017. India has gained market share in bed sheets in USA imports from 26% in 2009 to 50% in 2017, while China’s share fell from 29% to 20% and Pakistan’s from 26% to 16%.
Though Indian companies have gained share in the US home textiles market over the last 5-7 years, their share in exports to EU has remained stagnant as Indian imports to EU attract 6-9% duties while Bangladesh and Pakistan have duty-free access to EU. EU’s home textile imports dominated by Pakistan (38% share in 2017), followed by Turkey (19%) and China (18%). India stands fourth with a 12% share.
After two years of declining trend, the planting area for growing cotton around the world is projected to rebound in the 2017- 18 marketing year season (October to September).
A higher-than-expected rise in cotton acreage at 19% and a consequent 11% increase in crop production in FY 2017-18 are likely to moderate cotton prices in FY 2018-19. Domestic cotton prices increased in the last few months due to the pink bollworm issue.
The Domestic Textile and Apparel Industry in India stood at US$ 150 bn in July 2017, and expected to reach US$ 250 bn by 2019.
China is looking to shift focus to premium end of textile segment, it is likely that the current demand shift to India. This is already evident in reduction in China’s market share in global textile exports and increase in India’s share.

Regards
Harshit

neneram · October 2, 2018, 2:54pm

Hi All ,
Is anyone investing in this ?
My only concern is other income which is 100 cr that too from Exchange rate difference (Source : annual report), whats the meaning of exchange rate difference income ?
Are these guys already holding lot of forex at lower price which they convert back to INR at higher price ??

rahgrov · June 8, 2019, 7:28pm

Does anyone have the concall transcript for Q42019? I would really appreciate if you can share it here. Thanks!

gdtechindia · September 19, 2019, 3:41am

I would request members on this thread to share their outlook for IndoCount.

I invested earlier and sold at higher levels. I am planning to buy around current levels for medium - long term.

jamit05 · September 19, 2019, 3:55am

RoE has become dangerously low to 6%
EPS has fallen to 3.24 from 6.95 in 2016
Debt has not increased in this period. Indicates recession in the industry, but no problem with the finances of the business.
Inventory Turnover has decreased, means goods are not moving as fast as they were.
Sales growth is absent

At CMP Rs.48, I believe, this stock price could keep going further down due to recession in textiles. If the management and the business could hold the fort till the good times arrive, then this stock could again give multi-bagger returns.

Before buying I would let the stock consolidate for several quarters and would like to see the numbers improve.

eamitmehta · March 8, 2020, 12:48pm

bhavveshh · March 16, 2020, 10:24am

Firstly, this business has no moat. Its very easy to set up such business. Secondly, the good time this business had was 2011-15 was due to growing demand from US for its products. But now there is too much competition, growth is off - very typical of commodity business. So I do not see reasons to BUY. Given so many other options in a falling market, I do not have a positive view on the sector.

inteliinv · August 1, 2020, 5:43am

Hi,

Could anyone who attended the AGM, please shares some notes.

Regards
Krishna

sukhlani1 · October 26, 2020, 6:48am

Amazing result and good guidance for the year.

Pros From the current Qtr

All time high Quarter Revenue
Guidance is pretty strong and company is confident of repeating the Q2 numbers for the rest of the year
Looks like China + 1 Strategy working very well in the Home Textile sector.

Pros from the Financial overall

10X Revenue Growth in 11 years (if we extrapolate the current forecast)
ROCE has come down but looking at the current qtr numbers it should shoot up if the company can maintain EBIDTA at 18% for the rest of the year
D/E is around 0.33 indicating good control on leverage and a health position among its peer
Promoter Holding at 58.94 and hence remained stable over last 16 qtrs and no pledge
Tax Paying and consistent dividend Paying track record
Debtor Days at 43 and CCC all under control
Trade Receivable showing a downward trend and is currently at 13% compared to 17% a couple of years ago
Looks like RM cost has come down from Average of 58% last year to 44% this quarter driving Margins and not sure how much this is sustainable
Depreciation is at 2% so looks ok

Cons

Its a cyclical industry
I am not an expert but looks like currently trading at Fair Value. I will give such companies a future PE of 10 and from the numbers it looks like it is available at the same price

I am looking for advice if I am missing any thing and anyone who has tracked this company / sector to share the pitfalls. Also any guidance on when to exit will be helpful

PS : I am invested from lower levels and the above is not a buy/sell recommendation. I may change my mind anytime and hence request you do your own diligence before any action

praveen_sham · January 23, 2021, 6:23am

Excellent results by indocount.
In the concall, management gave guidance of quarterly run rate of excess of 20 million meters, which means the company shall be operating at 100% capacity.
Many tailwinds to the company in form of
1.retailers in US strongly going for china+1 strategy.
2.Ban by US of all textile products from Xinjiang province which is major textile hub in China.
3. “Home” taking centers stage in people’s life in post covid scenario and home textile should do well.
4.Indo count’s focus on Fashion, utility and institutional bedding (FUI) in which China is a major force. Even any mediocre Shift from China to india in FUI should be booster for indocount.
5. Indocount has a very strong “design” and “creative” setup which is very important in consumer products as the taste and likings of consumers across different countries varies hugely and success of a company depends on how well it caters to varying tastes.
7. ICIL has strong BS with very low debt and expansion should be a quite easy.

sharemarketgen_ · January 23, 2021, 10:44am

Even after Q2 results,management had given a similar guidance.Company’s total capacity is 90 million meters and they guided for 72-75 million mtrs. for FY21.This is inspite of a washout in Q1 so a 20 million run rate was baked in.Now they are saying they will exceed 75 million and just normal extrapolation of current run rate will give a nice ~25% kind of volume jump in fy22.I felt the management was pretty confident of maintaining margins at current levels going ahead.Since demand is very strong they have room to raise prices and pass on any RM pressure.Structurally too,things for non-China textile companies seem to have improved a lot.At current rate,ICIL should be able to generate 1500-2000 cr. kind of cash flow over next 3-4 years and with low debt this company is effectively available for 2800 cr. kind of EV.

However,if one goes back 4-5 years then at that time too,the company seemed to be in a sweet spot.Somehow things came crashing down and margins eroded for a good 2-3 years.I recall that the management has never been non-optimistic on their growth prospects.Thus,it seems markets have some niggling doubt on their current guidance.More importantly,since asset turns are quiet low(1-1.2x) ICIL might need to do a huge capex of atleast 1500-2000cr. to generate the kind of volume numbers they are seeing the opportunity for.Since cash balance is paltry compared to this,their debt could balloon over the next 1 year taking the EV back above 4000cr.(assuming no change in stock price) Personally feel the next round of re-rating(if any) would come only once there is clarity on the company’s capex plans.

Disc.: Invested,views are biased.

sujay85 · June 16, 2021, 7:56pm

ICICI Direct’s report on Indo Count Industries
http://content.icicidirect.com/mailimages/IDirect_IndoCount_StockTales.pdf

sujay85 · July 8, 2021, 4:51pm

Edelweiss initiated coverage on Indo Count Industries (5th May, 2021)

Raj_A_A · July 22, 2021, 8:40am

Indo Count Recognized as ‘Top Performer’ at Walmart’s Global Sourcing
Sustainability Summit

Indo Count Industries Ltd., one of India’s largest home textile manufacturers
announced that the company has been recognized as one of the ‘TOP PERFORMER’ suppliers at the recent Walmart’s Global Sourcing Sustainability Summit held on 15th July 2021.

Microsoft Word - ICIL_Press_Release_2021 (bseindia.com)

Raj_A_A · August 3, 2021, 11:47am

Q1FY22 Results.
Bumper results
Largest Exporter of bed Linen
Highest Market Share in USA

Vol. 18.1 Mn Metres. Vs 9.9 Mn Mtrs Y-O-Y (+83%)
FY22 Vol Guidance: 85-90 Mn Metres.

Total Rev 759 Cr +126%
EBITDA 178 Crs (+357%)

Capex: Brownfield exp- Increase of Bed Linen Capacity from 90 Mn to 108 Mn (150 Cr)
Modernisation of Spinning capacity- 50 Cr-

Revenue Visibility: Post Capex Rev. increase by 600 Crs over next 2 Yrs post commissioning.
Total capex 200 Crs funded by Internal Accruals and Debt.

Partnership with British Designer Jasper Conran

Strengthening Brands thro B2C and D2C

Nitin Spinners also gave a very good results.
Good time ahead for Textile companies.

12ddcb7b-6593-4e86-8c4e-2da201048b4b.pdf (bseindia.com)

sujay85 · December 8, 2021, 5:45am

This acquisition will catapult Indo Count to a leadership position in the global home textiles bedding segment, said a media release issued by the company. It said that with addition of almost 50% new capacity, Indo Count became the largest home textile bedding company, globally, with annual capacity of approximately 153 million meters. The acquisition will help the company for potential addition of Rs.1,300 – 1,500 crore per annum to the topline of the company.

ICICI Direct’s report on that

Mayank_Bajpai · November 1, 2023, 12:36pm

Interesting Facts about Indo Count from the recent Con-Call. Overall I see the Working capital-intensive nature of business and this is one of the key risks. However, guidence is excellent.

spartan · November 7, 2023, 2:27pm

Indo count Q2FY24.

ICIL announced superb Q2 results with revenue growth of 22% to reach its highest ever revenue of 1033Cr and EBITDA growth of 58%. EBITDA margins at 18%(incl other income) for Q2.

Overall management commentary was bullish for the H2 with increasing volumes guidance…

Q2FY24:

Volume growth of 40% in Q2 to reach 28.7million meters.

Volume guidance of 90-100 million meters for the year (revised upwards from earlier 80-90mm).

EBITDA margins will be maintained at 16-18% for the year.

US retail customers restocking continued from Q1 and better traction is continuing.

FTA agreement existing+ongoing, China+1 strategy by global players driving growth.

Adding new customers, brands and new geographies.

+ve on domestic market demand: two brands , “Boutique living” for aspirational customers and ”Layers” for the middle class.

Target to take domestic revenue to 10% of topline in next few years from 2.5% in Fy23.

70% of current business is from US…Going ahead US will be 60% and rest will be 40%

Employee salary will be at 300 Cr for the full year.

Cotton prices in India have stabilized.

Commissioned new spinning and fashion bedding unit.

1100 cr investment in capacity during the last 2 years. current capacity utilization is 65% on yearly basis.

Further investment on value added products, fashion, utility and institutional bedding. ( last yr contribution was 19% and target to reach 30% of revenue).

Discl: Invested.

Mayank_Jham · November 7, 2023, 4:58pm

Hi Fellow Investors
I have just started to track this company after I filtered out through techofunda analysis and stock rallied for more than 50%.

There are some queries that I would the experienced investors to help me figure out with the answers:-

1-Why ROCE have reached around 15% (on the lower side) which had been around 22-25%
2-Negative FCF of FY23
3-Why not entering cotton bedspread market where there is potential to grow and beat China?
4-Commodity (Cotton) prices volatile?

It will be great if u all can help me in finding out the answer of these basic ques