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."