Not Rated Indo Count Industries Ltd for the Target Rs NA by Emkay Global Financial Services Ltd
We met the senior management of Indo Count Industries (ICIL) to understand its growth outlook, margin trajectory, etc. KTAs: 1) Despite disruptions like container unavailability (read ME crisis) and flooding at the Bhilad (Gujarat) facility (Jul-26), the management maintains its core-business volume guidance at 105-110mn mtr in FY27. 2) ICIL maintains gross-margin stability (on a fullyear basis) amid elevated cotton yarn prices, on the back of price negotiations with customers (captive yarn consumption at 20-25%). 3) The company is witnessing a sharp jump in customer queries following the implementation of the UK FTA, and expressed confidence in achieving 20% revenue growth from non-US markets (~30% of core business revenue) in FY27, aided by new FTAs with Australia, Oman, etc. 4) All three plants under the utility bedding business have already achieved 60-65% (FY27 full-year target) utilization in 1QFY27; ICIL expects continued market-share gains in the US, and is on track to achieve ~$275mn by CY28 (~$175mn in bedding, ~$100mn from brands). 5) Overall, ICIL maintains its revenue guidance of >Rs80bn by CY28 (~2x on FY25 base) on the back of recovery in the core bedding business and the scaling of 'new business', with target EBITDA margin of 15%. At CMP, the stock trades at ~22x 1YF PER (Bloomberg estimate); we do not have a rating on the stock.
Core bedding business bouncing back
The core bedding business (~80% of revenue) had a weak FY26, as the US tariff spiked to 50%, pulling volumes to 94mn mtr (from 106mn mtr in FY25) and compressing margins. With normalization in US tariffs, the management expects core revenue to recover to ~Rs40bn in FY27 (from ~Rs34bn in FY26) and ~Rs55bn by CY28.
Scaling the US engine
ICIL's new business (US utility bedding and brands) is expected to nearly double to ~Rs15bn in FY27 (from ~Rs8bn in FY26) as the new US pillow plant ramps up (live since Jan-26) and all three plants together reach 60-65% capacity utilization (~31mn total pillow capacity). The management targets ~$275mn from these businesses by CY28 ($175mn from bedding; $100mn from brands).
Dilutive today, accretive tomorrow
The new business currently carries a 150-200bps drag on group margins due to start-up costs and lower utilization. The management expects this to fade as volumes scale, with bedding generating 15% EBITDA margins and brands clocking 16-17%. This underpins the blended EBITDA margin guidance of ~13% in FY27 vs <10% in FY26.
Growth without strain
ICIL plans ~Rs2.5bn of capex over the next 15-18 months, largely funded through internal accruals. Of this, ~Rs1.5bn will be for maintenance and the ZLD plant, and the remaining ~Rs0.9bn toward brownfield spinning expansion and modernization at Kolhapur facility. The management expects healthy operating cash flows, aided by rampup of new plants and a controlled working capital cycle.
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