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  • 08 Feb 2022
  • ICICIdirect Research

INDO COUNT POSTS MISS ON VOLUME FRONT OWING TO SUPPLY CHAIN CHALLENGES

ICIL - 332 Change: 7.20 (2.22 %)

News: Weighed down by various headwinds, Indo Count reported a soft performance in Q3FY22. Volumes declined ~12% YoY to 21.1 million metre on account of unprecedented supply chain challenges and lower demand in key geographies such as the US and UK on account of the third wave of pandemic. Judicious price hikes owing to input cost inflation and better product mix translated into average realisations increasing by 9% YoY to Rs.344/metre (down 8% QoQ). Subsequently, revenue de-grew 3% YoY to Rs.756.4 crore. The company has been able to maintain its gross margins at 50%+ levels (up 380 bps YoY), owing to hike in prices. However, owing to negative operating leverage (lower volumes) and rise in freight costs, EBITDA margins declined 176 bps YoY 15.3%. EBITDA declined by 13% YoY to Rs.115.8 crore. The company reported exceptional loss worth Rs.21 crore arising on account of loss due to lower realisations on e-scrips. Subsequently, PAT declined 23% YoY to Rs.71.2 crore.

Views: For 9MFY22, the company clocked 58 million metre with average realisation of Rs.365/metre. We believe it may fall short by ~6% on its volume guidance of 85 million metre in FY22E. Despite significant cost inflationary pressure, the company has been able to maintain its EBITDA margin guidance of 15-18%. It expects to exit FY22 with revenues of Rs.3000 crore (earlier guidance: Rs.3200 crore).  While the company expects short-term challenges to persist, it remains positive about the demand scenario in the long run on the back of China + 1 strategy and government steps to support the Indian home textile export market. With the latest acquisition of GHCL’s home textile business (~45 million metre), Indo Count would become the largest home textile bedding company, globally, with annual capacity ~153 million metre.

Impact: Neutral