Indo Count Industries hosted a conference
call on January 30, 2024. In the conference call, the company was represented
by Mr Kailash R
Lalpuria-CEO and Mr Muralidharan -CFO.
Key
takeaways of the call
Calendar year 2023 was a resilient year
with above normal holiday season. CY2023 witnessed improvement in consumer
sentiment; there is global logistics issue due to Red sea and also high
inflation due to geo political issues.
Indian textile industry is stable , domestic
cotton prices are lower than international cotton prices. Home textile is
pivotal for the domestic textile industry. Global home textile provides large
opportunity with increasing capacity, utilization and efficiency.
Volume:
Volumes in Q3FY2024 stood at 19.5 million
meter as against 14.7 million meter in Q3 FY2023, a growth of 33% YoY.
Volumes for 9MFY2024 stood at 68.2 million
meter as against 54.3 million meter in 9MFY2023, a growth of 26% YoY.
However, bunching of orders led to increase
in inventory as on Dec 31, 2023, however most of them has been dispatched in
January 2024.
Revenues:
Total revenues stood at Rs 727 crore in
Q3FY2024 as against Rs 662 crore in Q3FY2023.
Total revenue for 9MFY2024 stood at Rs 2507
crore as against Rs 2233 crore in Q3FY2023.
PAT stood at Rs 58 cr ore as against Rs 38
crore in Q3FY2023 and PAT for 9MFY2024 stood at Rs 246 crore as against Rs 182
crore in 9MFY2023.
Capacity utilization: The company expects
capacity utilization to be in the range of 64-65% for FY2024.
Technology
adoption: The company has engaged Accenture on a
digital transformative journey with a focus on process enhancement ,standardization
and optimization in the functions including manufacturing, supply chain,
logistics, and procurement.
Accenture will design, develop, and deploy
a digital core using SAP S/4HANA Cloud.
The technology platform, powered by data
and analytics, aims to automate and digitize operations.
The benefits being expected from digital
transformation include improved inventory management, quality standardization,
and optimal energy consumption.
Expansion: The company has completed the expansion of value added division
with a CAPEX of Rs 60 crore.
The company has committed Rs 50 crore in
setting up a solar power generation project in Gujarat with a capacity of 10 MW
which is expected to be commissioned in Q4FY2024. The project will help in
reducing power cost as well to achieve the ESG goal.
CAPEX: The company plans to incur a CAPEX of around Rs 50 crore towards
solar plant.
The company will invest around 3 million
towards technology adoption.
In FY 2025 CAPEX will be around Rs 100 cr
including Rs 60-70 crore towards maintenance capacity and the balance towards
adding solar power capacity.
Fashion
and value added category: Revenue contribution from
value added category stood at 19% of the total revenue in FY2023 and the
company expects the same to increase to 30%. The company is on track to achieve
the same.
Value added market size is around 11
billion US dollar and India share is around 15% in the total share as such
provides immense opportunity.
Geography: US contribute around 70% of the export revenues for the company and
the rest of the world contributes to around 30%. With FTA being signed with
Australia and on the ongoing FTA with UK and Europe should help the company to
reduce the contribution to 60% from US and the balance 40% from other parts of
the world.
Russia, Latin America and China will be net
importers going forward which will help achieve the geographical
diversification for the company.
UK and Europe contributes around 15% on the
revenue side and with improving geo political situation, revival in demand and
improving consumer sentiment this contribution is expected to improve.
Domestic
Market: Domestic market contributed to 2.5% of the
total revenues in FY2023 and the company expects the same to increase to 7-8%
of the increasing revenues going forward.
E-commerce
and digital: Ecommerce and digital business
contributed to around 10% of the total revenue in FY2023. This channel is
growing. It is a good channel and company has geared for its growth.
Red
sea: Cost and transit time has been impacted with
respect to UK and Europe. But there is no impact on container availability.
Cotton
Prices:The company expects cotton prices to remain
at similar levels however if demand improves than there might be some increase
in prices.
GHCL: Acquisition of GHCL has been completed on time and seamlessly. The
acquisition is working in favour of the company. The company will leverage the
GHCL customer base and will improve the margins. The company will utilise the
GHCL asset base more judiciously.
Guidance:
The company expects good performance in Q4,
thereby affirming its volume guidance
for FY24 intact.
With healthy order book and improving
consumer sentiment, the company has guided volume of 90-100 million meter for
FY2024 and expects to be in the mid-point of the same.
EBITDA margins are expected to be in the
range 16-18% in FY2024.
The company plans to double its revenue
from current levels in next few years. Increase in revenue will be through both
volume and increase in realization. Volumes will be driven by increasing market
share. With increasing retail contribution realizations are expected to improve
further.
Management
Commentary:
Commenting on the performance Mr. Anil
Kumar Jain, Executive Chairman, said,"As a leading exporter, our strategic
focus continues to revolve around the expansion in both global and domestic
markets. We are confident in our ability to evolve as a strong and credible
global supplier, further solidifying our position as a leader in the Home
Textile Bed Linen industry.
Through our proactive approach,
incorporating sustainability and strategic IT measures for process improvement,
alongside a diverse product portfolio spanning multiple geographies, we have
adeptly navigated challenges and maintained consistent growth. Our established
capabilities have played a key role in achieving this success, underscoring our
unwavering commitment to excellence in the industry."
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