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Stock Idea

Presentation on

Indo Count
Industries Ltd.
(ICIL)
By: Kalpesh Gothi

Revenue Break-Up (FY14 &


FY15E)
Revenue Mix (Rs. in Cr., % Contribution to total revenue)

Spinning Division
Total Capacity 80,016*
spindles
Cotton Yarn Production is
14,000 tn
Internal Usage is 15-25%

* Of which listed subsidiary Pranavaditya Spinning has 20,496


spindles

Home Textile Division


Current Capacity 45 mln
meters
Expanded Capacity 68*
mln meters
Output leads to 17 mln
meters of bed sheets
100% exports

* Expanded capacity to be operational in Q4FY15

Consumer Durable Division


- Discontinued
Assembly for large MNC`s LG, Samsung etc.
Started to earn VAT refund
Discontinued from Q2FY15

Home Textile Segment - Key


growth driver:

Manufacturer of Bed Sheet, Pillow Cases, Duvet Covers, Bed Skirts,


Comforters, Quilts, Fashion Bedding, Utility Bedding and Institutional
Linen

Currently, 70% of the Home textile exporting to USA

Emerged as one of the leading player in the Home Textile Segment


3rd largest manufacturer exporter of bed sheets from India
4th largest supplier of Bed Sheets into USA
14th Largest Home textile supplier to USA from across the globe

Global Presence -United States, Canada, Brazil, France, Germany,


Austria, Spain, UAE

Expanding Presence in United Kingdom, Japan, Australia and Russia

India - Advantage
Chinas Challenges
Importer of cotton

Losing export Competitiveness


Wage inflation

Rising power costs

Stricter environmental
compliance

Shift to higher value-added


products

Focus on domestic consumption

Yuan appreciation

Indias Advantage
Second largest producer of
cotton

Competitive Cost structure

Rising government focus and


favourable policies

FTA with ASEAN countries

Proposed FTA with EU

Rupee depreciation

Textile sector imports by


USA

Made-ups- an article manufactured and/or stitched from any type of cloth,


other than a garment

Growth in Made Ups Imports


to USA

Home Textile Business in USA


Current
addressable
market
which
contributes
95% of its
HT Business

New
product
segment
will
contribute
50% of
incremental
sales

Shifting Product Portfolio

Existing Bed Linen

Institutional Bedding
Hotels - Hospitals - Others

Fashion Bedding
Wide range of products

Utility or Basic Bedding


Bed & Pillows filled with poly fill fibre

Cotton Bed Sheets exports


to USA
Indias share increased by 20
percentage points in 5 years

Expanding Capacity

New Product Leading to growth


in Margin
Home textile revenue mix

Home Textiles EBIDTA & Margin


trend

Company to come out of CDR in


Q4FY15:

After the company went into CDR in Aug 2008 on the back of
demand slowdown and derivative loss to the tune of ~Rs.80 cr, it
has been making sustained and continuous efforts to get out of
the CDR.

In this process the promoters infused funds and followed proper


corporate practices to come out of the CDR in the quickest
possible time.

At the same time the company has been focusing on its core
competencies and growing the business in leaps and bounds
through new product development, new client acquisition and
geographical expansion.

Once out of the CDR, ICIL will be able to witness better growth
prospects along with ease of working environment.

Peer Comparison:

Financials
Fig: Revenue Trend

EBIDTA and Margin

PAT and Margin

Financials
cont
Fig: ROANW Trend

ROACE Trend

Turnover Ratios

Financials
cont
Fig: D/E Trend

Cash flow from Operation

Valuation

Increased share of home textiles to overall revenue and forayed into


value added product will lead to margin expansion.

Higher EBITDA margins on account of change in revenue mix and a


decline in interest expenses on gradual debt reduction will significantly
expand ROACE going further.

At the expected EPS of Rs.44.4 for FY16E and Rs.57.2 for FY17E, the
stock to trades at attractive valuations with a P/E(X) of 8.97 and 6.95
for FY16E and FY17E, respectively.

We assign a PE multiple of 10x on FY17E and arrive at a value of


Rs.572 per share. We maintained BUY rating on Indo Count
Ind. Ltd. with a target price of Rs.572, an upside of 44%.

Risks and Concerns

Significant exposure to United States

Volatility in raw material prices

Currency fluctuation risk

Slowdown in developed world markets

Thank You

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