ICIL 2.0 – Rewriting the future
About the stock:
Indo Count Industries (ICIL) is the world’s largest bed-linen player established in 1988. Traditionally operating in bed linen segment, the company expanded its presence into high margin utility and fashion bedding segment in US through organic and inorganic route. It has portfolio of ~25 brands (licensed + owned) to position well in US and other exporting markets. It has 4 manufacturing facilities in India with capacity of 153mn meters and 3 plants with 32.5 mn pieces in the US.
Investment Rationale
• ICIL 2.0 – scaling the core + expanding brands + entering utility segment: ICIL 2.0 emphasises on strengthening the core, expand into high margin segments such as utility/fashion bedding and expand the branded product portfolio to build a sustainable business model in long run. Over the past 12–15 months, it has invested significantly in value enhancement projects from acquisitions and capacity expansion to brand building and talent development, laying a solid foundation for its next phase of growth. The company expects the branded portfolio to add US$100mn and utility bedding business to add US$175mn over the next three years. With these strategic initiatives the company is aspiring to grow its revenues 2x by FY28.
• Trade deals with UK, US and Europe will provide incremental opportunities: India’s textile industry is gearing to leverage on various trade deals to expand is global presence through share gains and portfolio expansion in the coming years. The signing of free trade agreement (FTA) with UK provides India a competitive edge over other key home textile exporting countries. India has ~7% share in UK’s overall textile imports of US $27bn, which it expects to improve in the coming years. On the other hand, India accounts for 46%/39% of US’ bedsheet / terry towel imports (US $42bn market). Though imposition of 50% tariff by US on India exports will put stress on profitability in the near term, favourable trade deal will help to gain share in US home textile market in long run.
• US tariff to break growth momentum in FY26; fast recovery expected from FY27: ICIL revenues/PAT grew at CAGR of 13.5% over FY22-25 with capacity utilisation of ~70%, driven by improved by market share in the US home textile market. US tariff of 50% on India exports will put a short break on growth momentum in FY26. Signing of trade deal with US by Nov’25 will reduce tariff uncertainties on India. Hence, the core home textile business is expected to get back in recovery mode from FY27. This along with foray into high margin utility bedding will help ICIL’s revenues and EBIDTA to grow at CAGR of 22% and 45% respectively over FY26-28E.
Rating and Target Price
ICIL’s stock price has corrected by 34% from its high and is currently trading at 17x/12x its FY27E/FY28E earnings. With concerns regarding the tariffs are receding as India and US government close to sign a trade seal soon, the risk reward is favourable. We recommend BUY on the stock with price target of Rs370 (valuing at 15x average of FY27E/FY28E EPS).
