BUY CMP 1025.45 Target Price 1160.00 INDO COUNT INDUSTRIES LTD Result Update (PARENT BASIS): Q2 FY16 DECEMBER 1 st 2015 ISIN: INE483B01018 Index Details Stock Data Sector Textiles BSE Code 521016 Face Value 10.00 52wk. High / Low (Rs.) 1045.00/255.85 Volume (2wk. Avg.) 8341 Market Cap (Rs. in mn.) 40484.77 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 16799.50 20663.39 23969.53 EBITDA 3012.70 4380.64 4913.75 Net Profit 1390.40 2390.50 2782.28 EPS 35.22 60.55 70.47 P/E 29.12 16.94 14.55 Shareholding Pattern (%) As on Sep 2015 As on Jun 2015 PROMOTER 58.95 58.95 FIIs 8.46 6.98 DIIs 1.5 1.79 OTHERS 31.09 32.28 1 Year Comparative Graph INDO COUNT INDUSTRIES LTD S&P BSE SENSEX SYNOPSIS Indo Count Industries Ltd (ICIL) manufactures and sells combed and cotton grey/dyed yarns, and knitted grey fabrics primarily in India. During Q2 FY16, net profit jumps to Rs. 659.30 mn against Rs. 425.00 mn in Q2 FY15, an increase of 55.13%. Revenue for the quarter rose by 21.57% to Rs. 5821.30 mn from Rs. 4788.30 mn, when compared with the prior year period. EBIDTA for the quarter is Rs. 1244.50 mn as against Rs. 798.70 mn in the corresponding period of the previous year, grew by 55.82%. PBT for the quarter increased by 79.42% to Rs. 1046.00 mn from Rs. 583.00 mn in the corresponding period of previous year. EPS of the company stood at Rs. 16.70 a share during the quarter, registering 43.73% increase over previous year period. ICIL has declared 1 st Interim Dividend of Rs. 1/- per Equity Share of the par value of Rs. 10/- each for the financial year 2015-16. Revenues for H1 FY16 stood at Rs. 10431.2 mn, 31.2% higher than the Rs. 7952.1 mn in H1 FY 15. During H1 FY16, the Company reported it s highestever EBIDTA margins at 21.9%. This represented a 530 bps improvement over the EBIDTA margin reported in H1 FY15, which stood at 16.6%. The Company s profit after tax for the H1 FY16 stood at Rs. 1212.90 mn - representing an 80% growth over the corresponding period of FY15. Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 79% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Indo Count Industries Ltd 1025.45 40484.77 35.22 29.12 13.05 0.00 Welspun India Ltd 869.80 87391.00 63.74 13.65 6.10 105.00 Sangam (India) Ltd 287.30 11325.80 16.26 17.67 3.05 20.00 Siyaram Silk Mills Ltd 951.75 8921.70 85.17 11.17 2.05 100.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY16, Months Sep-15 Sep-14 % Change Revenue 5821.30 4788.30 21.57 PAT 659.30 425.00 55.13 EPS 16.70 11.62 43.73 PBIDT 1244.50 798.70 55.82 The company s net profit jumps to Rs. 659.30 million against Rs. 425.00 million in the corresponding quarter ending of previous year, an increase of 55.13%. Revenue for the quarter rose by 21.57% to Rs. 5821.30 million from Rs. 4788.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 16.70 a share during the quarter, registering 43.73% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1244.50 million as against Rs. 798.70 million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Cost of materials consumed Employee Benefit Expenses Q2 FY16 Value in Rs. Million Q2 FY15 % Change 2953.40 2610.90 13% 254.60 179.50 42% Depreciation 43.50 36.60 19% Other Expenditure 1144.00 786.20 46% Power and Fuel 160.80 145.80 10%
Latest updates Indo Count Industries Ltd has declared 1 st Interim Dividend of Rs. 1/- per Equity Share of the par value of Rs. 10/- each for the financial year 2015-16. The Board has approved Expansion of Phase 1 wherein the Capacity will be expanded from 68 million meters to 90 million meters. The total Capital Expenditure will be Rs. 175 Crores. The Phase 1 will be completed within 12-15 months and the same will be funded through internal accruals and debt. The Board has also given accent to Explore the Expansion of Phase 2 and the estimated project cost would be in the region of Rs. 300 crores. The Company has approved venturing in Domestic Business to create Home Textile Brands. The Total Capital expenditure over next 2 years is expected to be Rs. 25 Crores. The entry in domestic business will be done through a separate subsidiary of Indo Count. Business Today in its special issue identified Indo Count among 500 India s Most Valuable Companies for 2014-15 by ranking it at the 366 th position (previous year 877). The Company has granted of SILVER TROPHY for the Second Highest Exports of Made-ups in "Bed Linen / Bed Sheets / Quilts" under the Category - III for the year 2014-15 from the Cotton Textile Export Promotion Council (TEXPROCIL), a Government of India Enterprise. With this the Company has been elevated from position of Third to SECOND Largest manufacturer Exporter of "Bed Linen/Bed Sheets/Quilts" out of India. COMPANY PROFILE Indo Count Industries Limited (ICIL) is one India s leading integrated home textile Company with quality products and prestigious international customers. This integration has made it possible for the Company to enhance quality and maximise value-addition. The result is that the Company possesses the highest margins within the country s integrated textiles sector and also reports one of the highest asset-turnover ratios. The Company markets its products in 49 countries with nearly 65% of revenues being derived from the US, the Company s largest market. Its other prominent markets comprise the UK, Canada, Europe, MENA and Australia. The Company enjoys long-term relationships with large global retailers. This has translated into large and growing offtake, marked by a larger share of the customer s wallet. The Company is the second largest supplier of bed linen products from India and the fourth largest bed sheet supplier to the US. It is the thirteenth largest global home textiles supplier to the US (Source: Home & Textiles Today, February 2015).
The Company received an A rating from ICRA for long-term debt exposure and an A1+ rating for short-term exposure. The Company received the Export Excellence Award in the 1 st set for the Top Exporter - Non MSME Trading House category conferred by FIEO (Western Region). The Company reported consolidated revenues of Rs. 1,781.80 crore and a profit after tax of Rs. 145.87 crore in FY15.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2014-2017E SOURCES OF FUNDS Shareholder's Funds FY14A FY15A FY16E FY17E Share Capital 379.80 419.80 394.80 394.80 Reserves and Surplus 2320.42 3608.62 5052.07 6567.69 1. Sub Total - Net worth 2700.22 4028.42 5446.87 6962.49 2. Share application money pending allotment 11.00 0.00 0.00 0.00 3. Warrant application money pending allotment 12.50 0.00 0.00 0.00 Non Current Liabilities Long term borrowing 972.33 671.55 765.56 842.12 Deferred Tax Liability (net) 0.00 401.19 433.29 459.28 Other Long term liabilities 0.07 13.83 18.40 20.97 4. Sub Total - Non Current Liabilities 972.40 1086.57 1217.25 1322.38 Current Liabilities Short Term Borrowings 2686.26 2227.55 1871.14 1646.60 Trade Payables 1891.86 1828.30 2248.80 2518.66 Other Current Liabilities 867.34 1681.05 1882.77 2033.39 Short Term Provisions 267.60 682.00 477.40 525.14 5. Sub Total - Current Liabilities 5713.06 6418.89 6480.12 6723.80 Total Liabilities (1+2+3+4+5) 9409.18 11533.88 13144.24 15008.67 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 3154.94 3587.26 4232.96 4850.97 Intangible assets 20.56 15.93 17.52 19.10 Capital Work in Progress 3.26 144.39 167.49 187.59 a) Sub Total - Fixed Assets 3178.76 3747.57 4417.97 5057.66 b) Non-Current Investment 188.03 188.03 197.43 205.33 c) Deferred Tax Asset 97.87 0.00 0.00 0.00 d) Long Term loans and advances 46.85 102.05 272.50 316.10 1. Sub Total - Non Current Assets 3511.51 4037.65 4887.91 5579.09 Current Assets Inventories 2571.24 2641.26 3275.17 3864.70 Trade receivables 1669.20 2080.40 2288.44 2542.75 Cash and Bank Balances 117.96 162.67 375.60 450.72 Short-terms loans & advances 752.27 1254.30 1128.87 1264.34 Other current assets 787.00 1357.59 1188.25 1307.08 2. Sub Total - Current Assets 5897.67 7496.23 8256.33 9429.58 Total Assets (1+2) 9409.18 11533.88 13144.24 15008.67
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 14404.90 16799.50 20663.39 23969.53 Other Income 0.00 0.00 0.00 0.00 Total Income 14404.90 16799.50 20663.39 23969.53 Expenditure -12606.30-13786.80-16282.75-19055.77 Operating Profit 1798.60 3012.70 4380.64 4913.75 Interest -489.70-625.30-569.02-523.50 Gross profit 1308.90 2387.40 3811.61 4390.25 Depreciation -188.30-154.00-178.64-200.08 Exceptional Items 0.00-257.40 0.00 0.00 Profit Before Tax 1120.60 1976.00 3632.97 4190.17 Tax -71.30-585.60-1242.48-1407.90 Net Profit 1049.30 1390.40 2390.50 2782.28 Equity capital 354.80 394.80 394.80 394.80 Reserves 1306.30 2707.60 5098.10 7880.37 Face value 10.00 10.00 10.00 10.00 EPS 29.57 35.22 60.55 70.47 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2015 to 31 st Dec, 2015E Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E Description 3m 3m 3m 3m Net sales 4566.80 4609.90 5821.30 5530.24 Other income 0.00 0.00 0.00 0.00 Total Income 4566.80 4609.90 5821.30 5530.24 Expenditure -3695.80-3572.20-4576.80-4335.70 Operating profit 871.00 1037.70 1244.50 1194.53 Interest -166.10-148.50-155.00-136.40 Gross profit 704.90 889.20 1089.50 1058.13 Depreciation -38.20-42.10-43.50-48.72 Exceptional Items -257.40 0.00 0.00 0.00 Profit Before Tax 409.30 847.10 1046.00 1009.41 Tax -129.00-293.50-386.70-340.17 Net Profit 280.30 553.60 659.30 669.24 Equity capital 394.80 394.80 394.80 394.80 Face value 10.00 10.00 10.00 10.00 EPS 7.10 14.02 16.70 16.95
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 29.57 35.22 60.55 70.47 EBITDA Margin (%) 12.49% 17.93% 21.20% 20.50% PBT Margin (%) 7.78% 11.76% 17.58% 17.48% PAT Margin (%) 7.28% 8.28% 11.57% 11.61% P/E Ratio (x) 34.67 29.12 16.94 14.55 ROE (%) 63.17% 44.82% 43.52% 33.62% ROCE (%) 37.35% 52.77% 56.08% 47.51% Debt Equity Ratio 2.20 0.93 0.48 0.30 EV/EBITDA (x) 22.20 14.35 9.76 8.65 Book Value (Rs.) 46.82 78.58 139.13 209.60 P/BV 21.90 13.05 7.37 4.89 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 1025.45, the stock P/E ratio is at 16.94 x FY16E and 14.55 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY1 6E and FY17E is seen at Rs.60.55 and Rs.70.47 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 79% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 9.76 x for FY16E and 8.65 x for FY17E. Price to Book Value of the stock is expected to be at 7.37 x and 4.89 x for FY16E and FY17E respectively. Revenues for the first half of FY16 stood at Rs. 10431.2 mn, 31.2% higher than the Rs. 7952.1 mn reported during the corresponding period of the previous financial year. The revenue outperformance was derived from a growing client base and enhanced customer wallet share, a result of the Company s ability to provide a distinctive business-strengthening value proposition. The Company also reported its highest-ever EBIDTA margins at 21.9%. This represented a 530 bps improvement over the EBIDTA margin reported in the corresponding period of FY15, which stood at 16.6%. The Company s profit growth was substantially higher than the percentage increase in revenues, signifying a strong profitable growth. We expect that the company surplus scenario is likely to continue for the next two to three years, will keep its growth story in the coming quarters also. Hence, we recommend BUY in this particular scrip with a target price of Rs.1160.00 for Medium to Long term investment.
INDUSTRY OVERVIEW India s Textile Scenario: Textile is one of the key manufacturing sectors in India, contributing nearly 5% to the economy. It is also the second largest employer after agriculture, providing direct employment to 45 million people. India s Total Textile export registered a 12.94% growth amounting to US$ 39.45 billion in 2013-14 as against US$ 34.93 billion in previous year. The report of the Working Group constituted by the Planning Commission on boosting India s manufacturing exports during 12 th Five Year Plan (2012-17), envisages India s exports of Textiles and Clothing at USD 64.41 billion by the end of March, 2017. India is majorly an exporting country as far as textile sector is concerned and not dependent on import. Majority of import in textile takes place for re-export or special requirement. The USA and the EU, account for about two thirds of India s textiles exports and continues to remain primary markets for Indian textile and garment manufacturers. Hence the current improved economic scenario in US would assist growth of India s textile exports. Over the last five years the textiles sector has witnessed an increase in investments and have attracted foreign direct investment (FDI) worth USD 1.52 billion during April 2000 to December 2014. Cotton Scenario: India accounts for a third of global cotton area. India is now the largest producer of cotton in the world. India s 2014-2015 cotton production is forecast at 29.60 million 480 lb. bales on 12.70 million acres. Cotton consumption is forecast higher over the current year as export demand for cotton yarn and cotton lint recovers and markets diversify. Exports are forecast at 5.5 million 480 lb. bales. Government procurement has reached 7 million 480 lb. India s closing stock inventory in 2014-15 is 2,529 thousand MT. The U.S. Department of Agriculture (USDA) has projected that world cotton consumption in 2015-16 would exceed production for the first time in six years but the global ending stocks will remain in excess. The increase in the World stocks more than doubled between 2010-11 to 2014-15, mainly due to China s cotton policy, which supported domestic and world prices above market-clearing levels. For 2014-15, China s government has shifted from a price support to an income support program and intends to impose much stricter limits on imports. However it is projected that the world consumption would exceed production by 3 million bales in 2015-16, drawing world stocks down to about 107 million bales, the equivalent of 92 percent of projected global consumption. Most of the world s stock drawdown would occur in China whereas the ending stocks in other countries would reduce marginally.
The domestic demand of cotton yarn is primarily driven by the growth in consumption of readymade garments and home textiles. Consumption trend has been rising primarily because of better income levels, growing organized retail segment and rising consumer class. During the current period, 397 million kg of Cotton Yarn has been exported by India. During the period between 2010-2014 cotton yarn production has increased at 12.13% CAGR. India produces a comprehensive range of yarns for every conveyable end use and today, Indian yarn is widely accepted in International markets. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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