Indo Count Industries targets FY27 growth through core recovery and utility bedding scale-up

Investment View and Business Positioning

ICICI Securities maintained its BUY recommendation on Indo Count Industries Ltd and revised its target price to Rs 418 on June 2, 2026. The positive view is based on an expected recovery in the core bed-linen business, rapid scaling of utility bedding and US branded businesses, and a recovery in consolidated EBITDA margins as tariff uncertainty eases.

Indo Count Industries is described as the world's largest bed-linen player, with around 25 licensed and owned brands serving the US and other export markets. The company has four manufacturing facilities in India with capacity of 153 million metres and three US plants with capacity of 32.5 million pieces.

Q4FY26 Financial Performance

Consolidated revenue in Q4FY26 rose 3.4 per cent year on year to Rs 1,057.7 crore, while volumes declined 20 per cent to 20.5 million metres as US tariffs remained elevated for most of the quarter. Improved product mix and favourable currency supported realisations.

Gross margin expanded by 588 basis points year on year to 57.2 per cent, supported by favourable input costs. However, EBITDA margin declined by 62 basis points to 8.2 per cent as subsidiary margins remained under pressure from new-business incubation and US facility ramp-up costs. Consolidated EBITDA fell 4 per cent to Rs 86.3 crore.

Higher other income from forex hedges and lower interest expense drove adjusted PAT growth of 60.1 per cent to Rs 33.8 crore. Reported PAT was Rs 24.2 crore after an exceptional item that included Rs 12.8 crore of IGST-settlement interest.

FY26 Performance and Operating Factors

FY26 consolidated revenue was broadly flat at Rs 4,141.3 crore, while volumes fell 11.1 per cent to 94.1 million metres amid higher US tariffs. Standalone revenue declined 18 per cent to Rs 3,098.4 crore. New-business revenue reached Rs 792 crore, supported by the utility bedding ramp-up and the addition of Wamsutta to the US branded business.

FY26 EBITDA fell 25 per cent to Rs 401.2 crore and EBITDA margin declined by 325 basis points to 9.7 per cent. The deterioration reflected tariff absorption, new-business costs and lower operating leverage. Adjusted PAT declined 43 per cent to Rs 143.2 crore, also affected by higher depreciation following additions of US plants.

FY27 Growth Outlook

Management indicated that US end-consumer demand remains healthy despite inflation, with retailers passing on price increases. Order inflows were delayed in Q4FY26 because of tariff uncertainty but have normalised following lower tariff rates. Management does not expect a major US retailer inventory restocking cycle, as inventories are largely normalised.

Management guided for FY27 consolidated revenue of around Rs 5,500 crore, volumes of 105-110 million metres and EBITDA margin of around 13 per cent. Utility bedding is expected to become EBITDA positive from Q1FY27. Raw-material inflation in cotton, polyester, chemicals, energy and packaging remains a near-term headwind, although management expects price negotiations to enable pass-through over the coming quarters.

Core and New-Business Expansion

ICICI Securities expects core-business revenue to approach Rs 4,000 crore in FY27, aided by lower US tariffs, improved capacity utilisation of 71 per cent versus 62 per cent currently, price hikes and a better portfolio mix. New-business revenue is expected to nearly double to about Rs 1,500 crore in FY27.

The North Carolina greenfield pillow facility adds 18 million pieces of capacity, taking total utility bedding capacity to 32.5 million pieces. This comprises 31 million pillows and 1.5 million quilts. The broker expects utility bedding revenue to grow around 54 per cent in FY27, supported by volume growth of around 45-50 per cent and better realisations.

Broker Estimates and Valuation

The broker reduced FY27E earnings estimates by 3 per cent because EBITDA was lower than expected, while largely retaining FY28E estimates. Its Rs 418 target price is based on 16 times FY28E EPS of Rs 26.

Capital Expenditure and Leverage

Indo Count Industries plans Rs 250 crore of growth capex over the next 12-18 months, largely funded through internal accruals. Net debt declined by Rs 200 crore year on year to Rs 760 crore at FY26-end, while management expects no material increase in leverage.

Key Risks

• Continuation of 50 per cent US tariffs.
• Demand slowdown or uncertainty in key operating countries.
• Foreign-currency exposure.