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  • Stock recommendation: Indocount Industries Ltd: BUY - TP Rs.103

    Publish date: 7th August, 2018

    Result Update

    ICIL Q1FY19 results improved in volume terms over last year but was below our estimates in value terms.

    Key Highlights

    • Standalone net revenues for the quarter grew by 10% yoy to Rs 4.4 bn due to 22% yoy growth in volumes as the company is slowly witnessing an uptick in demand in US retail sales. But in value terms, the revenue was below our estimates due to lower currency realization, lower duty incentives, and more captive consumption of yarn.
    • EBITDA margins (including OOI) for the quarter declined by 110 bps yoy to 14% and was below our expectation due to higher employee cost and lower realization. As per management, the cotton prices are at an elevated level post increase in MSP.
    • The company has maintained its FY19E guidance of 58-60 mn mtr of volume with EBITDA margin (including OOI) to be in the range of 14-16%.

    Valuation & outlook

    • We have maintained our revenue and margins estimates based on strong volume in the quarter.
    • Based on FY19E/FY20E unchanged EPS of Rs 7.3/9.4, the stock is trading at PE of 11.3x/8.8x respectively. We maintain Buy as we see upside in the stock over our target price of Rs 103 (unchanged).


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