Indo Count hits 21-month high, rallies 12% on hopes of strong earnings

Shares of Indo Count Industries (ICIL) hit 21-month high at Rs 269.75, as they rallied 12 per cent on the BSE in Friday’s intra-day trade on the back of heavy volumes amid expectations of strong earnings. The stock price of the largest global Home Textile bed linen manufacturer was trading at its highest level since January 2022. It had hit a record high of Rs 315 on October 11, 2021.

The average trading volumes at the counter jumped over four-fold today. A combined 3.66 million equity shares representing 1.8 per cent of total equity of ICIL changed hands on the NSE and BSE till 12:17 PM.

ICIL is an integrated bedding solution provider, boasting capacity of 153 million metre per annum of dyeing/processing and cutting /sewing. ICIL exports to nearly 54 countries with the US being the prime market (around 75 per cent of revenues and commanding 20 per cent plus market share in bed sheet). ICIL is optimistic about its prospects in the coming year, due to its strong order book position.

The textile industry is expected to experience moderate revenue growth in 2023–2024 (FY24), with domestic demand growing steadily. However, the industry remains upbeat about export in FY24. Despite a slowdown in demand for various sectors, including textiles, Indian exporters are optimistic about a strong performance in 2023-24, ICIL said in its FY23 annual report.

Nearly 70 per cent of the industry’s output is based on cotton, as opposed to the global average, where goods made of man-made fibers have a more significant share. Due to the technical textiles' low cost, long lifespan, and versatility, India is another important market for the sector's growth. The healthcare and infrastructure sectors primarily drive the technical textile business, the company said.

ICIL further said, growth in home textiles in India seems quite positive in coming years, driven by healthy export demand with benefits from reciprocal FTAs (free trade agreements). Increased hygiene consciousness, rising consumer spending on home renovation, expansion in the real estate market, and fashion sensitivity towards domestic furniture will also contribute to the industry’s steady rise.

Government initiatives like signing of the FTAs with multiple countries & stability in export incentive policy to provide robust opportunities for Indian exporters. ICIL through its sizeable capacity is well poised to capture the export opportunity in global home textile trade, according to analysts.

Currently, the industry is witnessing demand greenshoots as inventory levels at the global retailers are gradually correcting. Furthermore, India has regained its lost market share (for Cotton sheets) in the USA from 50 per cent in CY22 to 58 per cent in YTD-23 (Jan-June 2023), analysts at ICICI Securities said in August report.

ICIL too is witnessing incremental business and enhancement in order book position for the upcoming holiday season. The brokerage firm expect volumes to grow by 18 per cent year-on-year in FY24 to 88 million pieces (capacity utilisation rate 57 per cent). With positive operating leverage kicking in and stabilisation of cotton prices, analysts build in EBITDA margin expansion of 125 bps during FY23-25E (EBITDA CAGR: 19 per cent). The brokerage firm ascribed BUY rating on the stock with target price of Rs 295 per share.