Buy Indo Count Industries; target of Rs 1030: Karvy

Karvy Stock Broking's report on Indo Count IndustriesThe revenue share of Bed-Linen is increased from Rs.10290mn to Rs.13820mn, a growth of 39% in FY15. The growth in revenue is mainly attributed to Home Textile segment on the back of higher realization and better product mix. Indo Count recorded EBITDA with an increase of 19% from Rs.2488mn to Rs.3063mn from FY14 to FY15. ICIL has increased its bed sheet manufacturing capacity from 36 Mn metre in FY07 to 68 mn by FY15. This Bed-Linen segment is expected to continue to be a key growth driver as the company plans to expand to new geographies and premium product segments such as utility bedding and top-of-the-bed, which are relatively bigger markets than bed sheets.Principal export to the most demanding international market ICIL is 3rd largest exporter of Bed Linen from India and the 4th largest Bed Sheet exporter to USA. Indo Count currently supplies a wide range of bed linen to global retail chains across 49 countries in 5 continents. ICIL is a net exporter, with ~70% of its clientele in the international markets. ICIL exports account for ~90% of its revenue (~70% of exports to the US). The company has a ~20% share in the Indian bed linen exports to the US. The contribution of export revenue is increasing at a CAGR of 33% in FY11 to FY15. We expect the export revenue will be increased with the contribution from institutional linen, utility and fashion bedding.Expecting good execution of business post CDR mechanism In FY08 due to global recessionary conditions and the consequent cash flow constraints, the company had approached its lenders to restructure its debts under the Corporate Debt Restructuring (CDR) system in FY09. With an improved demand scenario and ramp up of capacities, the company was able to exit CDR by FY15 which is four years ahead of the scheduled exit by paying Rs.257 mn as right to recompense to the bankers. The total debt as on FY15 is at Rs.3440 Mn.Valuation and Outlook:"At CMP of Rs. 870, Indo Count is trading at 12.1x FY17E EPS, on back of lower raw material prices, favorable product mix, improving cost efficiency and economies of scale; we initiate coverage on Indo Count with a “BUY” rating with a target price of Rs. 1030, based on 14.5x P/E FY17E, representing an upside potential of 18.3% in a 9-12 months period", says Karvy Stock Broking research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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