Recommendation from Textiles - Spinning - Cotton Blended Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

INDO COUNT INDUSTRIES : ‘COMFORTABLY’ PROFITABLE

HERE IS WHY
✓Good financial improvement
✓Good growth prospects
✓Focus on cost reduction

Indo Count Industries Ltd (ICIL) is one of India’s largest home textile manufacturers. It is engaged in the business of manufacture of bedding, quilts pillows, sleeping bags and preparation and spinning of cotton fiber including blended cotton. The company has focused on some of the world’s finest fashion, institutional and utility bedding and sheets and has built significant presence across the globe. Over the years, the company has successfully carved out a niche for itself and has become a total bedding resource. The company’s annual capacity is 90 million metres.

The company reported net sales of Rs 2,080.13 crore in FY20, an increase of 7.54 per cent. It had reported net sales of Rs 1,934.21 crore in FY19. The company reported PBIDT of Rs 237.85 crore in FY20, an increase of 43.08 per cent. It had reported PBIDT of Rs 166.23 crore in FY19. The company reported PAT of Rs 73.10 crore in FY20, an increase of 22.16 per cent. It had reported PAT of Rs 59.84 crore in FY19. The company has reported cash from operating activities of Rs 139 crore in FY20 as against CFO of Rs 214 crore it reported in FY19. 

Its net sales were at Rs 783.14 crore in December 2020, up by 22.97 per cent from Rs 636.86 crore in December 2019. It reported highest ever quarterly sales volume of 23.86 million in Q3FY21, a growth of 37 per cent YoY. The PBIDT was Rs 142.84 crore in December 2020, up 75.33 per cent from Rs 81.47 crore in December 2019. The quarterly net profit was at Rs 92.83 crore in December 2020 as against net profit of Rs 19.56 crore in December 2019, an increase of 374.59 per cent.

Home is taking centre-stage with consumer spending increasing due to more time spent at home on account of the new ‘work from home’ and ‘social distancing’ culture. Value-added products of health and hygiene are witnessing unprecedented surge in demand. Factors such as reduction in interest rates, buoyant property market, demand pick-up in suburbs and smaller cities of US are contributing to the demand revival. US holiday retail sales grew 8.3 per cent in 2020 over the same period in 2019. Despite unprecedented challenges, consumers and retailers demonstrated incredible resilience this holiday season.

The company is strongly moving towards the B2C and D2C segments through high-quality product offerings across varied price points, building visibility through digital campaigns and leveraging omnichannel and e-commerce distribution. It has increased its focus on brand promotion in the US, Europe, the Middle East and India through 10 active brands. Innovation and technological capabilities along with licensed brands, patents and trademarks will further strengthen brand offerings.

The management team is set to explore various opportunities to enhance capacities and markets. The total capex will be Rs 200 crore and will be funded by a mix of internal accruals and debt and is expected to be operational in H2 of FY 2022. These investments are expected to increase the revenue by Rs 600 crore over the next two years, post commissioning. The stock is trading at an adjusted PE multiple of 12.82x, which is well below its industry average PE. The total debt to equity ratio is 1.21. By virtue of these factors, we recommend our readerinvestors to BUY this stock.