*Indocount Industries Q4FY21 result update: Strong volume growth. Upgrade to BUY*
• Revenue increased by 79.5%yoy, EBITDA increased by 195.7%yoy to Rs 1.1bn, Adjusted PAT increased by 337%yoy to Rs 640mn in 4QFY21.
• Volume growth in FY21 was up 26% to 78.2mn mtr better than the management guidance of 75+mn mtr in FY21. Volume guidance for FY22 is 85-90mn mtr. Expect domestic home textile revenue to contribute form 1% in FY21 to 3% in FY23.
• Management has announced capex of Rs 2bn for (1) expansion of capacity by 20% to 108mn mtr and (2) modernization of spinning capacity.
• Revenue share from e-commerce and digital channels is expected to double from 4% to 8% by FY23.
• Indocount is focusing on fashion, Utility and Institutional segment which is 3x opportunity from current focus of “sheet set” market in USA.
• At CMP, it trades at 10.8x our FY23 earnings and 7.6x EV/EBITDA. We revised earnings by 18/14% for FY22/23 considering revision in volume & margin improvement. We maintain valuation to 13x FY23 EPS with target price of Rs 185.