Buy Indo Count Industries Ltd For Target Rs. 523 By Sushil Finance
Highlights from the Quarter (Q2FY26):
Indo Count Industries Ltd (ICIL) reported revenue of Rs. 1,062 crore in Q2FY26, up 11% QoQ from Rs. 959 crore in Q1FY26. On a YoY basis, however, revenue remained broadly stable, increasing by approximately 3%. Sales volumes declined to 25.2 million meters versus 27.8 million meters in Q2FY25, while realizations improved by roughly 14% YoY. The volume contraction was largely driven by tariff-related uncertainty between the US and India, which constrained order inflows.
EBITDA stood at Rs. 104 crore, down 34% YoY (Rs. 157 crore in Q2FY25) and 6% QoQ (Rs. 110 crore in Q1FY26). EBITDA margin compressed to 9.8%, compared with 15.1% in the prior-year quarter and 11.5% in the preceding quarter. The YoY margin erosion was primarily attributable to an adverse product mix and incubation costs associated with new business initiatives—costs that management expects to persist through year-end. In addition, US tariffs on Indian goods, effective from late August, necessitated partial absorption of incremental duties by the company (with certain customers sharing the burden). Net profit for the quarter came in at Rs. 39 crore, implying a net margin of 3.7%. Notably, ICIL continued to maintain strong balance sheet discipline, reducing debt by Rs. 175 crore during H1FY26.
Given that the US contributes nearly 70% of ICIL’s revenue, management has flagged near-term uncertainty arising from the recent escalation in tariffs between the US and India. Effective end-August 2025, tariffs were increased from the earlier 10–25% band to 50%, a development that could influence demand dynamics and customer ordering behaviour over the coming quarters. The company is actively engaging with its US clientele as they recalibrate sourcing strategies in response to the evolving trade environment. While ICIL may benefit from Free Trade Agreements (FTAs) with other regions, any meaningful diversification of its export mix away from the US is likely to materialise only over the next few quarters. Despite the prevailing headwinds, management has reiterated its medium-term outlook of doubling revenues and sustaining EBITDA margins in the 16–18% range.
OUTLOOK AND VALUATION
We expect due to prevailing tariff uncertainty between the US and India coupled with impact on operating margins led by unfavorable product mix and incubation costs of new businesses. 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 FY27E EPS at Rs.30.7, and assign a PE multiple of 17x, reducing the target price to Rs.523 (upside ~70.9%) from the current market price of Rs.306. We keep our BUY Rating for ICIL over an investment horizon of 24-30 months.
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