Indo Count Industries (ICIL) reported weak 4QFY24 results as EBITDA margins declined by 300 bps on increased brand building expenses. Revenues for the quarter grew by 35% YoY/+53% sequentially. While volumes grew by 41% YoY, realisations declined by 4% YoY on account of product mix changes. EBITDA margins at 15.1% fell sharply by ~300 bps on account of higher other expenses (32% in 4QFY24 v/s 29% in 4QFY23). The jump in other expenses was due to increased promotional spends on the brand Wamsutta which the company acquired recently. The impact of this promotional spends was 2% on EBITDA margins.
Strong FY24 results: FY24 revenue grew by 18% YoY to Rs35.6bn led by a 30% volume growth while realizations declined by 9%. EBITDA margins at 15.7% were marginally down by 60bps. Net profit at Rs3.4bn was by 21% in FY24.
Management Commentary
Target of $100m from brands and licensing revenue over next 3-4 years: ICIL acquired popular home fashion brand Wamsutta in USA offering bed, bath, rugs and secured license agreements with 2 other brands-Fieldcrest and Waverly. It expects $50m of revenues from bed linen and $50m from towels/rugs in FY26.
Revenue guidance of Rs60bn by FY27: The management is confident on achieving its FY27 target of doubling its revenues led by increase in value added products along with increased share of brands and licensee products. It also plans to increase its focus on the domestic B2C market with a target of 6-7% of total revenues from the current 2.5%
16-18% EBITDA margin guidance in FY25: Management has guided for an EBITDA margin of 16-18% in FY25 driven by increased contribution of value added products along with strong operating leverage as the capacity utilization is expected to jump to 80-85% from the current 65% in FY24.
Demand Outlook: Management indicated that inventory levels with retailers have normalized but demand is getting impacted by inflation as consumer discretionary spends have reduced. Any moderation in inflation/ rate cuts will lead to sharp increase in demand. The management has indicated FY25 performance will be better than FY24
Valuation: : We expect earnings to grow at 38% CAGR over FY24-26E on back of strong volume growth and supported by increased contribution from high margin brand business/ value added products. We continue to value ICIL at 16x FY26E EPS of Rs32 arriving at TP of Rs505 (same as before) with a BUY rating. The 10% decline in the stock gives investors a good opportunity to enter.
Shares of Indo Count Industries Limited was last trading in BSE at Rs. 335.65 as compared to the previous close of Rs. 344.85. The total number of shares traded during the day was 14158 in over 772 trades.
The stock hit an intraday high of Rs. 348.90 and intraday low of 332.45. The net turnover during the day was Rs. 4841508.00.
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