CD Equisearch Pvt Ltd Oct 18, 2016 Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance . Indo Count Industries Ltd (ICL) No. of shares (m) 39.5 Mkt cap (Rs crs/$m) 2964/443.9 Current price (Rs/$) 751/11.2 Price target (Rs/$) 1057/15.8 52 W H/L (Rs.) 1254/694 Book Value (Rs/$) 155/2.3 Beta 1.3 Daily volume (avg. monthly) 180730 P/BV (FY17e/18e) 3.5/2.5 EV/EBITDA (FY17e/18e) 6.3/5.7 P/E (FY17e/18e) 9.9/8.5 EPS growth (F17e/18e) 12.6/16.7 OPM (FY16/17e/18e) 20.9/20.9/20.6 ROE (FY16/17e/18e) 60.4/42.4/34.5 ROCE(FY16/17e/18e) 37.0/32.8/30.3 D/E ratio (FY16/17e/18e) 0.6/0.3/0.1 BSE Code 521016 NSE Code ICIL Bloomberg ICNT IN Reuters ICNT.BO Shareholding pattern % Promoters 59.0 MFs / Banks / FIs 1.8 FIIs 14.3 Govt. Holding 0.0 Public & Others 25.0 Total 100.0 As on Jun 30, 2016 Recommendation BUY Analyst KISHAN GUPTA, CFA, FRM Phone: + 91 (33) 4488 0043 E- mail: [email protected](Figures in Rs crs) FY14 FY15 FY16 FY17e FY18e Income from operations 1467.63 1716.89 2173.72 2424.13 2760.72 Other Income 30.27 14.81 18.89 13.23 13.52 EBITDA (other income included) 189.10 287.92 473.54 519.95 582.30 Profit after EO & MI 111.60 164.35 264.74 298.03 347.90 EPS(Rs) 31.45 44.06 67.06 75.49 88.12 EPS growth (%) 159.4 40.1 52.2 12.6 16.7 Company Brief ICL manufactures bed sheet sets, fashion bedding, utility bedding, institutional linen and yarn. Quarterly Highlights Dramatic slowdown in sales growth (6%) last quarter left investors bewildered for the seeming ambiguity portends stress in demand from overseas markets, particularly US. Not only sales growth slid to the lowest in at least nine quarters, but operating margins shriveled too - 19.8% Vs 20.7% in the same quarter a year ago, hurtling earning cuts - 4.1% for FY17. Steady rise in cotton prices in last few months probably elucidate the shrinkage in material margins - 46.5% Vs 50.1% in Q1FY16 and 47.4% in Q4FY16. Worryingly, growing revenue share of home textiles division and rapturous hurling of value added products (read: institutional bedding, fashion bedding and utility bedding) did little to preclude margin suppression. Poor dispatches of home textiles last quarter (13.46 mn mts Vs 12.54 mn mts in Q1FY16) helped smudge inexorable volume expansion of last two years - grew by nearly two-thirds to 54mn mts - casting nagging doubts on the efficacy of ongoing capex. Thanks to sharp jump in other income (Rs 15.96 crs ($2.4m) Vs Rs 8.26 crs ($1.2m)) and dramatic cut in interest expense, PAT rose by 15.6% to Rs 60.29 crs ($9.0m) compared to Rs 52.17 crs ($7.8m) in the same quarter last year. Fortifying presence in the premium segment of key North American markets gained momentum with Indo Count Global Inc signing licensing agreement with Walker Greenbank PLC UK for three of its brands: Sanderson, Harlequin and Scion; brands with strong presence in UK and Australia. Besides, Indo Count's domestic retail forays muster prominence with Indo Count Retail Ventures (ICRVL) - its subsidiary - launching its home textile brand 'Boutique Living' sometime in second quarter. The stock currently trades at 9.9x FY17e EPS of Rs 75.49 and 8.5x FY18e EPS of Rs 88.12. Post Welspun India’s Egyptian cotton fiasco, Indian textile exporters have been hurled in a state of trepidation as fears of global retailers reviewing their sourcing arrangements come to fore. Yet Indo Count's minimal exposure to branded cotton (12-13% of total turnover) somewhat shields it from ravaging outcomes of sourcing realignments of global retailers. Its reluctance to debt pile up fortifies its resistance to unforeseen events. We retain our buy recommendation on the stock with revised target of Rs 1057 (previous target: Rs 1365) over a period of 9-12 months.
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CD Equisearch Pvt Ltd Oct 18, 2016
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Net change (a+b+c+d+e) 22.72 19.48 -21.23 -6.03 4.16
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Key Financial Ratios
FY14 FY15 FY16 FY17e FY18e
Growth Ratios (%)
Revenue 23.7 17.0 26.6 11.5 13.9
EBIDTA 59.0 64.1 51.2 9.8 12.0
Net Profit 159.4 47.3 61.1 12.6 16.7
EPS 159.4 40.1 52.2 12.6 16.7
Margins (%)
Operating Profit Margin 11.0 17.4 20.9 20.9 20.6
Gross Profit Margin 9.6 14.5 19.3 19.5 20.0
Net Profit Margin 7.6 9.6 12.2 12.3 12.6
Return (%)
ROCE 29.2 33.3 37.0 32.8 30.3
ROE 96.0 67.6 60.4 42.4 34.5
Valuations
Market Cap / Sales 0.1 0.9 1.8 1.2 1.1
EV/EBIDTA 2.8 5.8 8.8 6.3 5.7
P/E 1.3 8.6 14.4 9.9 8.5
P/BV 0.8 4.7 6.8 3.5 2.5
Other Ratios
Interest Coverage 3.4 4.6 8.3 10.4 18.7
Debt-Equity Ratio 2.5 1.2 0.6 0.3 0.1
Current Ratio 1.0 1.2 1.4 1.8 2.7
Turnover Ratios
Fixed Asset Turnover 6.4 6.7 6.5 5.7 5.2
Total Asset Turnover 6.2 5.2 4.3 3.2 2.5
Debtors Turnover 14.9 14.6 13.1 11.1 11.1
Inventory Turnover 4.4 3.9 4.1 3.9 3.9
Creditors Turnover 6.7 7.3 10.8 14.2 15.1
WC Ratios
Debtors Days 24.4 25.1 27.9 32.8 32.8
Inventory Days 82.6 93.8 89.1 93.4 94.0
Creditors Days 54.1 50.0 33.9 25.8 24.2
Cash Conversion Cycle 53.0 68.8 83.2 100.5 102.5
Cash Flows (Rs crs)
Operating Cash Flow -7.5 169.2 132.1 227.8 280.9
FCFE 21.5 41.5 -16.5 -1.3 18.4
FCFF 44.5 140.2 45.5 150.8 117.5
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Cumulative Financial Data Figures in Rs crs FY10-12 FY13-15 FY16-18
Income from operations 1901 4371 7359
Operating profit 111 550 1530
EBIT 110 570 1504
PBT 17 405 1372
PAT 19 319 911
Dividends 0 0 43
OPM (%) 5.8 12.6 20.8
NPM (%) 1.0 7.3 12.4
Interest coverage 1.2 3.5 11.4
ROE (%) 17.4 61.0 40.8
ROCE (%) 8.1 28.4 32.6
Debt-equity ratio* 10.4 1.2 0.1
Fixed asset turnover 2.6 5.8 5.6
Debtors turnover 11.2 15.7 12.5
Inventory turnover 6.2 4.8 3.9
Creditors turnover 7.3 8.5 11.5
Debtors days 32.5 23.2 29.2
Inventory days 59.0 76.1 92.7
Creditor days 50.0 43.1 31.9
Cash conversion cycle 41.5 56.2 90.0
Dividend payout ratio (%) 0.0 0.0 4.7
FY07-09 implies three years ending fiscal 09; *as on terminal year; standalone data
Barely resurrections of this sort - fifty fold rise in cumulative PAT (Rs 911 crs ($136.4m) for FY16-18 Vs Rs 19 crs ($2.8m) for
FY10-12)) & four fold in sales (Rs 7359 crs ($1101.9m) in FY16-18 Vs Rs 1901 crs ($284.7m) for FY10-12) - are trumped,
particularly for non-puny firms. Most measures of profitability (OPMs / NPMs/ ROE) and efficiency (asset turnover ratios)
would seem no less picturesque to the conservative, let alone apprentice. Dividends were resumed last fiscal after a gap of
fifteen years, though payout ratio at 3.8% paled to Welspun India's 25.9% - top management egged to conserve capital (post
CDR exit in FY15) to avoid deleterious effect of debt overload: debt - equity ratio plunged to 0.6 last fiscal from 10.4 in
FY12; though absolute debt more or less remained unchanged.
Gradual augmentation of home textiles capacity (from 36 mn mts in FY10 to 45 mn mts in FY12 to 68 mn mts in FY15) to
satiate ravenous overseas demand and defocusing on low margin spinning business underpinned margins – OPMs rose to
12.6% in FY12-15 period compared to 5.8% in the preceding three year period, while NPMs surged by 6.3% in the same
period. Consequently, revenue share of exports ballooned to 90% last fiscal from 66% in FY11 and home textiles annual
dispatches averaged some 36mn mts in FY13-15 period from just 18 mn mts in FY12 - 61mn mts average projected for FY16-
18 period. Shelving of the miserably ailing consumer durable business post FY15 has freed nearly Rs 37 crs ($5.5m) of much
needed capital. Yet profound worsening of cash conversion cycle remain unabated for its estimated to reach a pitiful 90
days in FY16-18 period from 41.5 days seen in three years ending FY12.
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Financial Summary – US dollar denominated million $ FY14 FY15 FY16 FY17e FY18e
Equity capital 5.9 6.3 6.0 5.9 5.9
Shareholders funds 28.4 50.4 84.5 126.5 175.7
Total debt 72.2 61.2 53.9 35.6 23.7
Net fixed assets (incl CWIP) 38.0 47.4 60.3 72.7 95.8
Investments 0.0 0.0 0.0 0.0 0.0
Net current assets 4.9 19.4 39.9 68.5 112.6
Total assets 45.9 62.4 94.1 133.5 198.5
Revenues 242.6 280.8 332.1 363.0 413.4
EBITDA 31.6 51.2 72.3 77.9 87.2
EBDT 23.3 40.6 64.0 70.7 82.8
PBT 20.1 38.0 61.1 67.1 78.4
PAT after EO 18.4 26.9 40.4 44.6 52.1
EPS($) 0.52 0.72 1.02 1.13 1.32
Book value ($) 0.8 1.3 2.1 3.2 4.5
Operating cash flow -1.2 27.0 19.9 34.1 42.1
Investing cash flow 1.0 -12.3 -18.1 -16.3 -27.4
Financing cash flow 4.0 -7.5 -5.0 -18.7 -14.0
Historical income statement figures translated at average rates; balance sheet and cash flow at year end rates; projections (FY17&18) at current rates All dollar denominated figures are adjusted for extraordinary items.
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
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