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New business drives growth; expect core to bounce back

Indo Count (ICNT) revenue grew at a robust 26% YoY to INR12b in 1QFY27, led by the new business. New business grew at a robust 198% YoY, while the core business remained flat. Bed linen volumes declined 3% YoY, impacted by container unavailability, and increased 12% QoQ. Gross margin improved by 170bp YoY to 55.3%, while EBITDA margin settled at 11.9% (+30bp YoY), as operating leverage improved with scale-up in new business. The Bhilad unit, with a capacity of 45m mtrs pa, had been temporarily shut since 23 July due to floods and has now partially resumed operations. We expect ICNT to deliver 21% revenue CAGR over FY26-28, led by scale-up of the new business.

Robust new business growth; core business impacted by product mix

ICNT’s revenue grew 26% YoY to INR12b in 1QFY27, driven by robust growth in new business (+198% YoY). The new business now contributes 32% to the revenue, in which the utility bedding segment has reached 60-65% capacity utilization. Management expects the new business to double and generate INR15b in revenue for FY27, with the US branded business expected to generate ~INR5b. Core business remained flat, with bed linen volumes declining 3% YoY (23m mtrs), impacted by container unavailability problem, which persists in 2Q as well. Capacity utilization for bed linen was at 60% for 1Q. Realization in the core business improved 3% YoY, while it declined 9% QoQ, impacted by product mix. Management remains confident of generating revenue of INR40b in FY27 from the core business with volumes of 105-110m mtrs. 1Q is seasonally weak historically, while 2Q and 3Q are expected to be the strongest quarters, driven by US festive demand.

Scale-up of new business to drive margins

In 1Q, gross margin expanded 170bp YoY to 55.3%. EBITDA grew 29% YoY to INR1.4b, with EBITDA margin at 11.9% (+30bp YoY), driven by operating leverage owing to the scale-up in new business. Management expects FY27 margins to be around ~13% (inc Other Income), while its long-term margin target is 15-16%. We expect gross margins to improve to ~55% and EBITDA margins to improve to 13-14%, led by improving utilization in the utility business and ramp-up of US brand business

Valuation and view: Reiterate Buy

We expect ICNT’s growth to be driven by emerging business, followed by the core business. We expect the core business to post 11% CAGR over FY26-28, while the new business is well positioned to deliver ~58% growth, supported by ICNT’s favorable base and strong client relationships. We expect a CAGR of 21%, 45%, and 90% in revenue, EBITDA, and PAT, respectively, over FY26-28, fueled by growth in the emerging business, followed by core portfolio. We tweaked our estimates and reiterate our BUY rating with a TP of INR550, valuing the stock at 15x FY28E EV/EBITDA. Key risks: customer and geographic concentration and commodity price movements. (refer to our IC note dated Jun’26).

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