Result Update: Indocount Industries Ltd - BUY - TP Rs.103 - Kotak

ICIL Q4FY18 results were below our estimates on both revenues as well as margin front.

Key Highlights

- Standalone net revenues for the quarter declined by 13.2% yoy to Rs 4.1 bn due to higher in-house spinning transfer, change in incentive structure, currency factor, etc. On demand side, destocking continued to impact volume off-take, but the intensity of destocking has reduced.

- EBITDA margins (including OOI) for the quarter declined by 350 bps yoy to 14.1% and was below our expectation due to currency and raw material impact, higher power & fuel expenses, increased job work charges, etc. As per management, the cotton prices expected to be stable.

- The company is targeting at 58-62 mn mtr of volume (7-14% yoy implied growth) with EBITDA margin (including OOI) to be in the range of 14-16%.

Valuation & outlook

- We have cut our revenue and margins estimates factoring in lower pace of restocking and challenges related to raw material price volatility.

- Based on FY19E/FY20E revised EPS of Rs 9.4/7.3, the stock is trading at PE of 11.5x/8.9x respectively. We maintain Buy as we see upside in the stock after recent correction with revised target price of Rs 103 (Vs Rs 135 earlier).

Shares of INDO COUNT INDUSTRIES LTD. was last trading in BSE at Rs.85.3 as compared to the previous close of Rs. 83.75. The total number of shares traded during the day was 45078 in over 859 trades.

The stock hit an intraday high of Rs. 86.1 and intraday low of 83.45. The net turnover during the day was Rs. 3837117.

Source : Equity Bulls

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