Indo Count Industries’ new businesses drive Q1 growth as margins recover

Investment View and Q1FY27 Highlights

ICICI Securities retains a BUY recommendation on Indo Count Industries, supported by strong Q1FY27 execution, recovery in core-business margins and the rapid scaling of new businesses. The broker’s target price is Rs 480, compared with the CMP of Rs 392.

Indo Count Industries is described as the world’s largest bed-linen player, with about 25 licensed and owned brands positioned in the US and other export markets. Its manufacturing footprint comprises four facilities in India with capacity of 153 million metres and three US plants with capacity of 32.5 million pieces.

Consolidated Financial Performance

Standalone revenue grew 11.8% year on year to Rs 819.4 crore, while standalone EBITDA margin increased 188 basis points to 13.9%.

Core Business Execution

The core business benefited from a 14.7% increase in realisation. However, volume declined 2.5% year on year to 23 million metres because of shipping-container shortages. Volumes increased 12.2% sequentially, and capacity utilisation recovered to 60.1% from 53.6% in Q4FY26.

New Businesses and Subsidiary Margins

New-business revenue nearly tripled year on year to Rs 387 crore in Q1FY27, led by Wamsutta and other licensed brands, along with improving utilisation. Subsidiary margin, calculated as the difference between standalone and consolidated margins, declined 260 basis points year on year to 7.7% because of ramp-up costs at the new US facility.

Growth Outlook and Capacity Utilisation

Management has retained its Rs 4,000 crore FY27 core-business revenue guidance, supported by improving demand, volume recovery and better realisations. It expects the seasonally stronger Q2FY27 and Q3FY27 periods to benefit from the US festive season. Customer price negotiations are expected to begin benefiting realisations from Q2FY27.

• The non-US core business, which accounts for around 30% of the core business, is expected to grow 20% in FY27.
• UK and EU traction is improving, although related orders are expected to scale gradually over the next 12 months.
• Utility bedding capacity is 32.5 million pieces, with utilisation expected at 60% to 65% in FY27.
• ICICI Securities forecasts 50.8% utility-bedding revenue growth, driven by about 42% volume growth and 6% realisation growth.

Branded Business Opportunity

Management targets about Rs 500 crore of FY27 revenue from the US branded business, which generated about Rs 125 crore in Q1FY27. The branded portfolio includes Wamsutta, Fieldcrest, Waverly and Gaiam. Management’s longer-term new-business ambition is US$275 million by 2028, supporting an Rs 8,000 crore revenue aspiration by CY28.

Broker Estimates

The broker expects FY27 operating EBITDA margin of about 11.5% to 12%, supported by core-margin recovery and operating leverage as new businesses scale. ICICI Securities expects consolidated operating EBITDA margin to gradually rise to 14% to 15% over the medium term.

Management expects about 15% EBITDA margin in the core bed-linen business and, once fully scaled, utility bedding. The US branded business is expected to earn margins 100 to 200 basis points higher. ICICI Securities reduced its FY27E and FY28E earnings estimates by 3.4% and 3.1%, respectively, because of lower EBITDA-margin assumptions.

Valuation and Key Risks

The Rs 480 target price is based on 19 times FY28E EPS of Rs 25.2.

• A slowdown in key export markets could affect growth.
• Higher input prices could pressure margins.