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Highlights from the Quarter (Q3FY26):

Indo Count Industries Ltd (ICIL) reported revenue of Rs. 1,063 crore in Q2FY26, up 0.07% QoQ from Rs. 1,062 crore in Q2FY26. On a YoY basis, however, revenue has marginally down by approximately 7.7%. Sales volumes declined to 24.8 million meters versus 27.7 million meters in Q3FY25, while realizations improved by roughly 3% YoY. The volume contraction was largely driven by tariff-related uncertainty between the US and India, which constrained order inflows.

EBITDA stood at Rs. 91 crore, down 38% YoY (Rs. 146 crore in Q3FY25) and 12% QoQ (Rs. 104 crore in Q2FY26). EBITDA margin compressed to 8.6%, compared with 12.7% in the prior-year quarter and 9.8% in the preceding quarter. The YoY margin erosion was primarily on account of under-absorption of fixed costs due to lower volumes, the impact of the U.S. tariff and incubation costs associated with the new business along with impact of new labour law (Rs.9.2 crore impact in Q3FY26). Net profit for the quarter came in at Rs. 24 crore, implying a net margin of 2.3%. Furthermore, the company has reduced its debt levels by Rs.215 crore in 9MFY26 from March 2025.

Management described the early-CY2026 trade developments as structurally positive for the Indian textile sector, led by progress on the India–EU FTA and a bilateral trade arrangement with the U.S. Although formal notifications are awaited, management indicated that tariff-related uncertainty has materially eased, improving export visibility. The proposed India–EU FTA is expected to provide tariff parity and better market access in the large EU market, creating a more level competitive landscape. Benefits from the U.S. trade arrangement are likely to accrue gradually from Q1FY27 as order flows realign. Furthermore, management reiterated confidence in achieving a 2x revenue scale-up by FY28, driven by core volumes of ~153 million meters and incremental revenue of ~USD 275 million from new brands and the Utility Bedding segment. Q3FY26 commentary highlighted steady demand and a robust order pipeline, supporting the medium-term growth outlook.

OUTLOOK AND VALUATION

We expect gradual improvement in revenues and margin profile of ICIL from Q1FY27 backed by India-USA trade deal and a medium term impact backed by EU FTA. However, We expect FY28E revenue at Rs.5,764.7 cr, EBITDA of Rs.954.1 cr at an EBITDA margin of 16.6% and PAT of Rs.608.8 cr. We estimate FY28E EPS at Rs.30.7, and assign a PE multiple of 17x, reducing the target price to Rs.523 (upside ~94.4%) from the current market price of Rs.269. We keep our BUY Rating for ICIL over an investment horizon of 24-30 months.

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