Buy Indo Count Ltd for the Target Rs 550 by Motilal Oswal Financial Services Ltd
Expandable TAM to boost PAT growth
* Indo Count (ICNT) is a global home textile company with an integrated manufacturing network and a presence across 50+ countries. Its product portfolio spans bed sheets, pillowcases, comforters, quilts, fashion bedding, and utility bedding, catering to mass through premium segments.
* ICNT is a leading bed linen exporter (core business – 81% of sales), with ~70% of revenue coming from the US and a ~24% market share in India’s exports to the US. We expect 15% CAGR for core business over FY26-28 with margin recovery.
* For the utility bedding segment (emerging business), ICNT has acquired Fluvitex (81% stake) and Modern Home Textiles (100% stake), along with setting up a greenfield pillow manufacturing facility in North Carolina. Collectively, these facilities have an annual revenue potential of ~USD275m with margins of ~15-16%, and we expect this segment to deliver 40% growth over FY26-28 in the US market.
* We model a CAGR of 20%, 44%, and 90% in revenue, EBITDA, and PAT, respectively, over FY26-28, fueled by growth in the emerging business, followed by core portfolio.
* We initiate coverage on ICNT with a BUY rating and a TP of INR550, valuing the stock at 15x FY28E EV/EBITDA (25% premium to the 10-year mean).
Core business to grow in mid-teens; emerging business drives growth
ICNT is engaged in the manufacturing of bed linen, which is majorly exported to the US (70% revenue contribution), while the UK and ROW contribute 10% and 20%, respectively. ICNT is the largest exporter of bed linen (core business – 81% of sales) and has a market share of ~24% in exports to the US from India. We expect 15% CAGR over FY26-28, driven by the 10% US tariff (creating a level playing field vs. Bangladesh and Pakistan) and FTAs with the UK and EU. Following the acquisition of a utility bedding business, the company has diversified into higher value-added segments, evolving into a comprehensive home textile player with an expanded total addressable market (TAM) of ~USD15b. Currently, the new business (19% of sales) has an annual revenue rate of USD100m+, which we expect to increase to USD168m by FY28, driven by utility bedding and aided by growth in the US branded segment. Overall, we expect 20% revenue CAGR with 400bp margin expansion over FY26-28
Revenue target of INR7b in next three years without new major capex
ICNT has an established manufacturing footprint across India and the US. Its core business (bed linen) is entirely manufactured in India, with facilities in Kolhapur and Bhilad and a total capacity of 153m meters. The acquisition of the home textile business of GHCL, including the Bhilad unit, added an additional 45m meters of capacity. Current utilization in the core business is ~62%, and we do not expect any major capex over the next three years to achieve ~INR5b in domestic sales. For the utility bedding segment, ICNT has acquired Fluvitex (81% stake) and Modern Home Textiles (100% stake), along with commencement of operations at its greenfield pillow manufacturing facility in North Carolina in Jan’26. Collectively, these facilities have an annual revenue potential of ~USD275m with margins of ~15-16%, and capacity utilization is expected to reach ~75%+ in FY28.
Financial outlook
We are optimistic about ICNT’s financial outlook, with revenue expected to clock a steady 20% CAGR over FY26-28, supported by emerging business followed by core business. We expect the core business to post 15% CAGR over FY26-28. In the emerging segments, supported by ICNT’s favorable base and strong client relationships, we believe the company is well positioned to deliver ~40% growth over FY26-28 in the US market, enabling it to achieve ~4% market share. Profitability is likely to strengthen, with EBITDA margins inching up to ~13.5% and APAT margins improving to ~7.6% by FY28. Consequently, return ratios are expected to improve meaningfully, with RoE/RoCE reaching 16.5%/11.3% in FY28E.
Valuation and view: Initiate coverage with BUY rating
We initiate coverage on ICNT with a BUY rating and a TP of INR550, valuing the stock at 15x FY28E EV/EBITDA (25% premium to the 10-year mean). We believe the core business would continue to clock 15% CAGR over FY26-28, driven by the 10% US tariff (creating a level playing field vs. Bangladesh and Pakistan) and FTAs with the UK and EU. Currently, the new business has an annual revenue rate of USD100m+, which we expect to increase to USD168m, driven by utility bedding and supported by growth in the branded segment. Overall, we expect 20% revenue CAGR with 400bp margin expansion over FY26-28, as the emerging business is margin-accretive.
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