Textile

June 20, 2022

Recommendation & target price
Several near term headwinds loom over textile sector Company Revised TP Revised Rec.
The textile value chain has recently been marred by various challenges such as: a) KPR Mill 635.0 HOLD
all-time high cotton prices (up 2x YoY) b) increasing freight expenses and delay in
GEL 400.0 HOLD
order delivery owing to port congestion for global retail chains c) inability/reluctance

Sector Update
of US retailers to absorb higher prices owing to recent spike in inflation impacting Indo Count 140.0 HOLD
consumer sentiments, d) inventory pile up for large global retailers. Indian home Faze Three 325.0 HOLD
textile players witnessed a decline in market share in the US. Also, India’s apparel
export data in May 2022 has seen a receding trajectory. US is one of the key textile VTL 285.0 HOLD
markets for India accounting for 50% of home textile exports and 28% of apparel
Key Risks Key F
exports. Hence, reduced purchasing power in key export markets would negatively
impact order book of Indian exporters. Textile stocks witnessed a significant rally in i) Faster than expected
the past two years. However, we believe current headwinds could in the near term demand recovery in
outweigh long term structural story (expected free trade agreements with key markets of US and
Europe/UK, PLI scheme, China+1). UK
Higher cotton prices subdue demand ii) Significant decline in
Owing to a decline in cotton production (~8% YoY) domestic cotton prices have cotton price can
risen ~90% YoY to | 272/kg. Correspondingly yarn prices, which were already improve margins
trading at higher levels, inched up further by ~38% YoY to an all-time high of
| 385/kg in May-June 2022. Yarn players who had recorded one of their best EBITDA
margins in FY22 are now reeling under pressure as yarn spreads have shrunk from
an all-time high of | 110/kg to | 40/kg (exhibit: 2). This is expected to negatively
Research Analyst Key F
impact margins for yarn players in H1FY23 as cotton prices are expected to remain

ICICI Securities – Retail Equity Research

elevated owing to supply deficit till start of the next cotton season which begins from Bharat Chhoda
[email protected]
October 2022. While domestic demand for yarn remains stable, volume for yarn
exports has been impacted (exhibit: 3). Majority of RMG exporters were able to pass Cheragh Sidhwa
the increased input cost initially as demand was healthy post lockdown relaxations. [email protected]
However, increased inflation has led to slackening of demand and reluctance from
global retailers to accept further price hikes can negatively impact the volume growth
of Indian RMG players going ahead.

Bulging inventory may slow order book momentum in near term

The recent event/news flow suggested that major US retailers (like GAP, Target and
Walmart) were grappling with excess inventory issues owing to lower-than-expected
demand and delayed deliveries due to port congestion resulting in seasonal and
occasion specific products remaining unsold (exhibit: 7). Global retailers have
significantly trimmed down their profit projections sighting RM inflation and
removal/reduction of stimulus. US is a major revenue contributor for companies in
our coverage universe (Gokaldas: 85%, Indo Count: 75%, Faze Three: 60%, KPR
Mill: 25%). While our conversation with RMG players have indicated no major
slowdown in orders yet, we do believe there could be challenges, which could result
in slackening of tempo of order flows to sourcing partners of global retailers in the
immediate ensuing quarters. Ramp up of demand in key geographies (US, UK,
Europe) in holiday season in Q4CY22 stays the most critical aspect to be monitored.
Cautious outlook; players with strong b/s to weather storm
Textile companies in our coverage universe had demonstrated strong performance
in FY22 with our top picks KPR and Gokaldas Exports (GEL) reporting their historical
high RoCE of 27% and 20%, respectively, while maintaining a comfortable liquidity
position (D/E= KPR: 0.4x, GEL: 0.1x). We expect companies with better balance
sheets to weather the challenging scenario. The textile sector has good long term
potential but we advise a cautious stance on the sector currently owing to near term
headwinds. Hence, we downgrade the stocks from BUY to HOLD (Exhibit: 12).
 Sector Update | Textile ICICI Direct Research

Financial story in charts….

Exhibit 1: Significant rise in cotton, yarn prices
Elevated cotton prices have been the pain point for
400 330
Indian textile exporters. The main reason for significant
increase in cotton prices has been lower production
350
280 estimates by industry bodies like Cotton Corporation of
300 India (CCI) and increased consumption demand. In
230 2020-21, India total cotton lint fibre output was 353

|/ kg
250 lakh bales (lb) of 170 kg each. For 2021-22, production
estimate released by CCI in May 2022 has estimated
|/ kg

180
200 cotton production at 323.63 lb (~ 8% lower YoY). Also
130 CCI is expecting the consumption of cotton to increase
150
to 345 lb in 2021-22 compared to 334.87 lb in year
100 80
2020-21 (~ 3% higher YoY). Lower cotton availability
for the mills has led to spiralling of cotton prices, which
Jun-17

Jun-18

Jun-19

Jun-21

Jun-22
Jun-16

Jun-20
Mar-19

Mar-20

Mar-22
Sep-16

Mar-17

Sep-17

Mar-18

Sep-18

Sep-20

Mar-21

Sep-21
Sep-19
Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21
have almost doubled over the last one year.

Yarn Prices Cotton Prices

Source: Company, ICICI Direct Research

Exhibit 2: Adjusted cotton yarn spreads currently at multi-year low levels

140.0
112
120.0

100.0

80.0
|/kg

60.0

40
40.0

20.0

0.0
Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21
Jun-16

Jun-17

Jun-20

Jun-21

Jun-22
Jun-18

Jun-19
Mar-18

Mar-19

Mar-20

Mar-21

Mar-22
Sep-16

Mar-17

Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Source: Bloomberg, Company, ICICI Direct Research* Conversation ratio form cotton to yarn=1.2kg

Exhibit 3: India exports for cotton yarn & home-textile decline sharply in May 2022
10834

12000
10331

10239
9992
9788
9642
9638

9453
9147

10000
8821
8785
8104

8053
8040
7923
7260
7117
6894

8000
6848
6707
6639
6484

6476
6365

6192

6188
6174

6079
5920
5761

5766
5723
5670
5497

5275
| crore

6000
3517

4000
1129

2000

0
Jul-19

Jul-20

Jul-21
Jan-21
Jan-20

Jan-22
Nov-20

Nov-21
Nov-19

Mar-21
Sep-19

Mar-20

Sep-20

Sep-21

Mar-22
May-19

May-20

May-21

May-22

Source: Ministry of Commerce, Company, ICICI Direct Research

ICICI Securities | Retail Research 2

 Sector Update | Textile ICICI Direct Research

Exhibit 4: India exports for apparels slowing down in April-May 2022

13269
14000

12003
12002
11511
11053
10661

10541

10377
12000

10351

10347

10943
10020

9816

9661

9566
9473
9391

9387
9176
8967

8799
8745
10000

8648
8561

8313

8108
8094

7987
7973
7866

7743
7703

7544

7367
8000
| crore

6084
6000

3909
4000

2000
963

0
Jul-20

Jul-21
Jul-19

Jan-20

Jan-22
Jan-21
Nov-20
Nov-19

Nov-21
Mar-20

Mar-21
Sep-19

Sep-20

Sep-21

Mar-22
May-19

May-20

May-21

May-22
Source: Ministry of Commerce, Company, ICICI Direct Research

Exhibit 5: India’s share in cotton bed sheet exports to US Exhibit 6: India’s share in cotton pillow case exports to US
100 100
90 90
80 19 14 12 16 80 19 16 14 18
22 20 21 21 20 23
70 70
20 25 15 16 17 20
60 17 19 20 60 14 13 13
16 16
50 50
%
%

40 40
30 30 53 54 57
49 50 49 50 52 57 50 50 52 50 52
20 20
10 10
0 0
CY16 CY17 CY18 CY19 CY20 CY21 Jan-Mar CY16 CY17 CY18 CY19 CY20 CY21 Jan-Mar
22 22

China Pakistan India China Pakistan India

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 7: Excerpts from global retailer’s latest quarterly press releases

Recent commentary from global retailers suggest multiple
Company Key Comments headwinds in the near term with respect to the demand
and costs. Excess inventory holding by many global
“The Company is planning several actions in the second quarter, retailers is expected to impact near term demand, which
Target Corporation including additional markdowns, removing excess inventory and could lead to lower order flows to sourcing partners across
cancelling orders”. globe including Indian apparel & textile suppliers. Higher
Gross margin rate declined 810 basis points as compared to last year logistics cost and higher unit cost to make it difficult for
to 55.3%, driven by higher average unit cost from freight inflation sourcing partners to pass on the input cost increase
Abercombie & Fitch partially offset by higher average unit retail on lower promotions. thereby negatively impacting their margins
Inventories $563M, up 45% from last year due primarily to higher
freight cost and higher in-transit inventory
GAP: The brand was slightly impacted by slowed demand stemming
from inflationary pressures impacting the lower-income consumer as
well as continued inventory lateness to last year. Q1CY22 (Feb-April 2022) sales vs inventory growth
GAP Inc
Old Navy: Sales in the quarter were negatively impacted by size and 50 45
43
assortment imbalances, ongoing inventory delays, and product
40 36
acceptance issues in some key categories. 33 32
Supply chain costs were higher by 360 bps and included higher 30 27
Bed Bath & Beyond freight and shipping inflation (170 bps), first time port related fees
20
(100 bps), warehouse related inventory adjustments (90 bps)
%

General merchandise markdowns were $100M more than expected. 10 4 4 3

Softness in discretionary categories as company lapped strong sales
0
Walmart last year due to stimulus spending. Home revenue growth was soft
Target GAP Zara Abercombie Wallmart
due to lapping stimulus last year and continued supply chain -10
constraints -12
-20
Source: Company, ICICI Direct Research
Sales Growth Inventory Growth

ICICI Securities | Retail Research 3

 Sector Update | Textile ICICI Direct Research

Exhibit 8: Change in estimates (KPR Mill)

FY23E FY24E Comments
(| crore) Old New % change Old New % change

Expected lower demand from global clients has led to

lowering of revenue estimates. Also we expect the
Revenue 5,477.6 5160.6 -5.8 6,064.0 5744.3 -5.3 margins to be negatively impacted in near term owing
to high cotton prices hence we have reduced EBITDA
margin estimates

EBITDA 1,320.1 1140.5 -13.6 1,479.6 1315.4 -11.1

EBITDA Margin (%) 24.1 22.1 -200 bps 24.4 22.9 -150 bps
PAT 870.7 732.4 -15.9 994.2 867.8 -12.7
EPS (|) 25.5 21.4 -16.0 29.1 25.4 -12.8
Source: Company, ICICI Direct Research

Exhibit 9: Change in estimates (Gokaldas Exports)

FY23E FY24E Comments
(| crore) Old New % change Old New % change
Key Global clients have high inventory levels and
this could result in lower replenishment and
slacken the pace of new orders which we
Revenue 2,166.3 2005.2 -7.4 2,556.2 2386.1 -6.7
believe can impact the revenue growth
momentum. Also owing to elevated input cost
we have reduced our EBITDA margin estimates.
EBITDA 238.0 204.1 -14.2 322.9 282.6 -12.5
EBITDA Margin (%) 11.0 10.2 -81 bps 12.6 11.8 -79 bps
PAT 134.9 106.0 -21.4 177.4 147.9 -16.6
EPS (|) 22.9 18.0 -21.5 30.1 25.1 -16.7
Source: Company, ICICI Direct Research

Exhibit 10: Change in estimates (Faze Three)

FY23E FY24E Comments
(| crore) Old New % change Old New % change

Factoring lower demand from key markets we have reduced

Revenue 590.2 565.0 -4.3 693.5 655.4 -5.5
revenue and earnings estimates for FY23E/FY24E

EBITDA 92.1 87.0 -5.5 111.7 105.5 -5.5

EBITDA Margin (%) 15.6 15.4 -20 bps 16.1 16.1 -1 bps
PAT 61.6 57.8 -6.2 76.1 71.5 -6.0
EPS (|) 25.3 23.8 -6.1 31.3 29.4 -6.0
Source: Company, ICICI Direct Research

Exhibit 11: Change in estimates (Indo Count)

FY23E FY24E Comments
(| crore) Old New % change Old New % change
Changing demand pattern and lower new home sales has led
to slackening of demand for home textile products in USA
which is a key market for the company. Also we believe that
Revenue 3,398.6 3214.2 -5.4 4,288.3 3953.2 -7.8
high input cost would weigh on the margins negatively as the
company would not be able to fully pass on the cost increase
to customers.
EBITDA 486.0 459.6 -5.4 716.2 620.6 -13.3
EBITDA Margin (%) 14.3 14.3 0 bps 16.7 15.7 -100 bps
PAT 278.8 258.5 -7.3 458.2 384.6 -16.1
EPS (|) 14.1 13.1 -7.2 23.2 19.5 -16.1
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 4

 Sector Update | Textile ICICI Direct Research

Exhibit 12: Valuation and target price

Company Earlier Tp (|) Earlier P/E multiple (x) Earlier Recommendation New Tp (|) New P/E multiple (x) CMP (|) Upside (% ) Recommendation
KPR Mill 815.0 28.0 BUY 635.0 25.0 560.0 13.4 HOLD
Gokaldas Exports 570.0 19.0 BUY 400.0 16.0 367.0 9.0 HOLD
Indo Count 190.0 8.0 BUY 140.0 7.0 123.0 13.8 HOLD
Faze Three 405.0 13.0 BUY 325.0 11.0 285.0 14.0 HOLD
Vardhman Textiles 285.0 7.0 HOLD 285.0 7.0 255.0 11.8 HOLD
Source: Company, ICICI Direct Research

Price Chart: KPR Mill Price Chart: Gokaldas Exports

800 30000 600 30000

700 25000 500 25000
600 400 20000
500 20000
400 15000 300 15000
300 10000 200 10000
200 100 5000
100 5000
0 0 0 0

Sep-19

Sep-20

Sep-21
Dec-19

Dec-20

Dec-21
Jun-19

Jun-20

Jun-21

Jun-22
Mar-20

Mar-21

Mar-22
Sep-19

Sep-20

Sep-21
Dec-19

Dec-20

Dec-21
Jun-19

Jun-20

Jun-21

Jun-22
Mar-20

Mar-21

Mar-22

KPR MILL BSE 500 Gokaldas Exports BSE 500

Price Chart: Faze Three Price Chart: Indo Count

450 30000 350 30000

400 300
25000 25000
350
300 20000 250 20000
250 200
15000 15000
200 150
150 10000 10000
100 100
5000
50 50 5000
0 0
0 0
Sep-19

Sep-20

Sep-21
Dec-19

Dec-20

Dec-21
Jun-19

Jun-20

Jun-21

Jun-22
Mar-20

Mar-21

Mar-22

Sep-19

Sep-20

Sep-21
Dec-19

Dec-20

Dec-21
Jun-19

Jun-20

Jun-21

Jun-22
Mar-20

Mar-21

Mar-22

Faze Three BSE 500

Indo Count BSE 500

Price Chart: Vardhman Textiles

600 30000
500 25000
400 20000
300 15000
200 10000
100 5000
0 0
Feb-20

Feb-21

Feb-22
Oct-19

Oct-20

Oct-21
Jun-20

Jun-21

Jun-22
Jun-19

Vardhman Textiles BSE 500

ICICI Securities | Retail Research 5

 Sector Update | Textile ICICI Direct Research

Financial summary (KPR Mill)

Exhibit 8: Profit and loss statement | crore Exhibit 9: Cash flow statement | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Net Sales 3,530.2 4,822.5 5,160.6 5,744.3 Profit/(Loss) after taxation 515.3 841.8 732.4 867.8
Add: Depreciation 146.7 141.1 197.5 207.5
Growth (%) 5.3 36.6 7.0 11.3
Net Increase in Current Assets -94.8 -594.9 -138.4 -321.0
Total Raw Material Cost 1,962.9 2,685.7 2,951.9 3,245.5
Net Increase in Current Liabilities 20.7 210.2 -63.1 31.2
Gross Margins (%) 44.4 44.3 42.8 43.5 CF from operating activities 587.8 598.2 728.5 785.5
Employee Expenses 393.7 445.5 552.2 631.9 (Inc)/dec in Investments -225.8 -75.8 -30.9 -34.0
Other Expenses 344.0 472.6 516.1 551.5 (Inc)/dec in Fixed Assets -270.9 -912.6 -119.7 -265.0
Total Operating Expenditure 2,700.6 3,603.9 4,020.1 4,428.8 Others 0.0 -112.0 0.0 0.0
EBITDA 829.6 1,218.6 1,140.5 1,315.4 CF from investing activities -496.7 -1,100.4 -150.6 -299.0
EBITDA Margin 23.5 25.3 22.1 22.9 Inc / (Dec) in Equity Capital 0.0 0.0 -180.0 0.0
Inc / (Dec) in Loan -130.5 527.9 -348.8 -117.2
Interest 32.8 23.3 41.8 36.0
Others -37.5 22.8 -144.9 -345.4
Depreciation 146.7 141.1 197.5 207.5
CF from financing activities -168.0 550.7 -673.7 -462.6
Other Income 38.8 87.2 50.0 55.0
Net Cash flow -77.0 48.5 -95.8 23.9
Exceptional Expense - - - - Opening Cash 154.2 77.3 125.8 29.9
PBT 688.9 1,141.4 951.2 1,127.0 Closing Cash 77.3 125.8 29.9 53.8
Total Tax 173.6 299.7 218.8 259.2 Source: Company, ICICI Direct Research
Profit After Tax 515.3 841.8 732.4 867.8
Source: Company, ICICI Direct Research

Exhibit 10: Balance sheet | crore Exhibit 11: Key ratios | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Equity Capital 34.4 34.4 34.2 34.2 Per share data (|)
EPS 15.0 24.5 21.4 25.4
Reserve and Surplus 2,315.8 3,152.4 3,558.5 4,079.2
Cash EPS 19.2 28.6 27.2 31.5
Total Shareholders funds 2,350.2 3,186.8 3,592.7 4,113.4
BV 68.3 92.6 105.1 120.3
Total Debt 657.1 1,185.0 836.2 719.0
DPS 0.9 0.1 4.3 10.2
Non Current Liabilities 47.7 75.7 77.2 78.9 Cash Per Share 2.2 3.7 0.9 1.6
Source of Funds 3,055.0 4,447.4 4,506.1 4,911.3 Operating Ratios (% )
EBITDA margins 23.5 25.3 22.1 22.9
Gross block 2,090.3 2,916.4 3,086.4 3,346.4 PBT margins 19.5 23.7 18.4 19.6
Less: Accum depreciation 836.4 977.5 1,175.1 1,382.5 Net Profit margins 14.6 17.5 14.2 15.1
Net Fixed Assets 1,253.9 1,938.8 1,911.3 1,963.8 Inventory days 94.4 97.5 95.0 98.0
Debtor days 33.2 36.3 38.0 40.0
Capital WIP 28.6 115.3 65.0 70.0
Creditor days 12.6 21.3 15.0 15.0
Intangible assets 1.7 1.5 1.5 1.5 Return Ratios (% )
Investments 234.9 310.7 341.6 375.6 RoE 21.9 26.4 20.4 21.1
Inventory 913.3 1,288.8 1,343.2 1,542.3 RoCE 24.0 26.6 22.4 24.1
Cash 77.3 125.8 29.9 53.8 RoIC 27.1 30.5 24.9 26.8
Debtors 321.0 480.2 537.3 629.5 Valuation Ratios (x)
Loans & Advances & Other CA 209.5 269.6 296.6 326.2 P/E 37.4 22.9 26.1 22.1
EV / EBITDA 23.6 16.4 17.2 14.8
Total Current Assets 1,521.0 2,164.4 2,206.9 2,551.8
EV / Sales 5.6 4.2 3.8 3.4
Creditors 122.2 282.1 212.1 236.1
Market Cap / Revenues 5.5 4.0 3.7 3.3
Provisions & Other CL 87.9 138.2 145.2 152.4 Price to Book Value 8.2 6.0 5.3 4.7
Total Current Liabilities 210.1 420.3 357.2 388.5 Solvency Ratios
Net Current Assets 1,310.9 1,744.1 1,849.7 2,163.4 Debt / Equity 0.3 0.4 0.2 0.2
LT L& A, Other Assets 225.0 337.0 337.0 337.0 Debt/EBITDA 0.8 1.0 0.7 0.5
Other Assets 0.0 0.0 0.0 0.0 Current Ratio 6.9 4.9 6.1 6.4
Application of Funds 3,055.0 4,447.4 4,506.1 4,911.3
Quick Ratio 2.5 1.8 2.3 2.5
Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 6

 Sector Update | Textile ICICI Direct Research

Financial summary (Gokaldas Exports)

Exhibit 12: Profit and loss statement | crore Exhibit 13: Cash flow statement | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Net Sales 1,210.7 1,790.3 2,005.2 2,386.1 Profit/(Loss) after taxation 26.5 117.1 106.0 147.9
Growth (%) (11.3) 47.9 12.0 19.0 Add: Depreciation 52.6 59.0 66.6 80.5
Total Raw Material Cost 617.1 916.0 1,044.7 1,221.7 Net Increase in Current Assets 13.2 -156.7 -114.2 -110.0
Gross Margins (%) 49.0 48.8 47.9 48.8 Net Increase in Current Liabilities -12.1 65.6 55.0 36.5
Employee Expenses 371.6 538.8 610.0 710.0 Others -30.1 -33.5 -26.0 -30.0
Other Expenses 120.6 130.1 146.4 171.8 CF from operating activities 50.2 51.5 87.4 125.0
Total Operating Expenditure 1,109.2 1,584.8 1,801.1 2,103.5 (Inc)/dec in Investments -9.3 29.4 14.5 0.0
EBITDA 101.5 205.5 204.1 282.6 (Inc)/dec in Fixed Assets -35.0 -77.9 -149.0 -110.0
EBITDA Margin 8.4 11.5 10.2 11.8 Others 17.3 -21.5 -0.2 0.0
Interest 34.5 40.2 27.7 27.0 CF from investing activities -27.0 -70.0 -134.7 -110.0
Depreciation 52.6 59.0 66.6 80.5 Inc / (Dec) in Equity Capital 0.0 8.0 0.0 0.0
Other Income 12.2 10.7 15.0 17.0 Inc / (Dec) in Loan -26.2 -301.7 46.9 -10.0
Exceptional Expense - - - - Others 5.9 309.7 0.0 0.0
PBT 26.6 117.0 124.7 192.1 CF from financing activities -20.2 16.0 46.9 -10.0
Total Tax 0.1 (0.1) 18.7 44.2 Net Cash flow 3.0 -2.5 -0.3 5.0
Profit After Tax 26.5 117.1 106.0 147.9 Opening Cash 12.3 15.3 12.7 12.3
Source: Company, ICICI Direct Research Closing Cash 15.2 12.7 12.3 17.3
Source: Company, ICICI Direct Research

Exhibit 14: Balance sheet | crore Exhibit 15: Key ratios | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Equity Capital 21.4 29.5 29.5 29.5 Per share data (|)
Reserve and Surplus 268.6 678.6 784.6 932.5 EPS 6.2 19.9 18.0 25.1
Total Shareholders funds 290.1 708.1 814.1 962.0 Cash EPS 18.4 29.8 29.3 38.7
Total Debt 364.8 63.1 110.0 100.0 BV 67.6 120.1 138.0 163.1
Non Current Liabilities 113.3 130.0 130.0 130.0 DPS 0.0 0.0 0.0 0.0
Source of Funds 768.2 901.1 1,054.1 1,192.0 Cash Per Share 3.6 2.1 2.1 2.9
Operating Ratios (% )
Gross block 225.6 291.6 451.6 561.6 EBITDA margins 8.4 11.5 10.2 11.8
Less: Accum depreciation 100.3 136.3 177.0 227.5 PBT margins 2.2 6.5 6.2 8.1
Net Fixed Assets 125.3 155.3 274.7 334.1 Net Profit margins 2.2 6.5 5.3 6.2
Capital WIP - 11.1 - - Inventory days 78.1 88.4 91.0 84.0
Intangible assets 1.9 2.7 2.7 2.7 Debtor days 54.2 18.8 35.0 38.0
Investments 183.9 154.5 140.0 140.0 Creditor days 33.7 24.0 35.0 35.0
Inventory 259.2 433.6 499.9 549.1 Return Ratios (% )
Cash 15.3 12.7 12.3 17.3 RoE 9.1 16.5 13.0 15.4
Debtors 179.8 92.2 192.3 248.4 RoCE 9.3 20.4 16.5 20.6
Loans & Advances & Other CA 97.5 178.0 125.8 130.4 Valuation Ratios (x)
Total Current Assets 551.8 716.5 830.3 945.3 P/E 59.4 18.5 20.4 14.6
Creditors 111.7 117.8 192.3 228.8 EV / EBITDA 17.1 10.0 10.4 7.5
Provisions & Other CL 132.7 192.2 172.7 172.7 EV / Sales 1.4 1.2 1.1 0.9
Market Cap / Revenues 1.3 1.2 1.1 0.9
Total Current Liabilities 244.4 310.0 365.0 401.5
Price to Book Value 5.4 3.1 2.7 2.2
Net Current Assets 307.4 406.4 465.3 543.8
Solvency Ratios
LT L& A, Other Assets 149.6 171.1 171.4 171.4
Other Assets 0.0 0.0 0.0 0.0 Net Debt / Equity 0.6 -0.1 -0.1 -0.1
Application of Funds 768.2 901.1 1,054.1 1,192.0 Net Debt/EBITDA 1.6 -0.5 -0.2 -0.2
Source: Company, ICICI Direct Research Current Ratio 2.2 2.3 2.2 2.3
Quick Ratio 1.1 0.9 0.9 0.9
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 7

 Sector Update | Textile ICICI Direct Research

Financial summary (Indo Count Industries)

Exhibit 16: Profit and loss statement | crore Exhibit 17: Cash flow statement | crore
(Year-end March) FY21A FY22E FY23E FY24E (Year-end March) FY21A FY22E FY23E FY24E

Net Sales 2,519.2 2,942.0 3,214.2 3,953.2 Profit/(Loss) after taxation 249.1 358.5 258.5 384.6
Add: Depreciation 43.2 40.9 65.9 79.1
Growth (%) 21.1 16.8 9.3 23.0
Net Increase in Current Assets -466.6 -442.1 -159.0 -238.1
Total Raw Material Cost 1,269.8 1,353.0 1,575.0 1,885.7
Net Increase in Current Liabilities 77.6 -74.6 52.5 84.2
Gross Margins (%) 49.6 54.0 51.0 52.3 CF from operating activities -96.7 -117.3 217.9 309.8
Employee Expenses 159.0 191.2 225.0 300.4 (Inc)/dec in Investments -166.8 165.4 -1.0 0.3
Other Expenses 713.6 863.8 954.6 1,146.4 (Inc)/dec in Fixed Assets -31.6 -464.9 -419.3 -62.0
Total Operating Expenditure 2,142.5 2,408.0 2,754.6 3,332.5 Others -1.8 0.0 0.0 0.0
EBITDA 376.7 534.0 459.6 620.6 CF from investing activities -200.2 -299.4 -420.3 -61.7
Inc / (Dec) in Equity Capital 0.0 0.0 0.0 0.0
EBITDA Margin 15.0 18.2 14.3 15.7
Inc / (Dec) in Loan 207.7 745.0 -1.3 -266.0
Interest 28.1 47.4 78.0 62.0 Others 65.4 -59.7 -37.5 -56.4
Depreciation 43.2 40.9 65.9 79.1 CF from financing activities 273.1 685.4 -38.8 -322.4
Other Income 37.8 40.2 20.0 20.0 Net Cash flow -23.8 268.7 -241.3 -74.3
Exceptional Expense (3.7) - - - Opening Cash 150.5 126.5 395.2 154.0
PBT 339.6 485.9 335.7 499.5 Closing Cash 126.6 395.2 154.0 79.7
Total Tax 90.5 127.4 77.2 114.9 Source: Company, ICICI Direct Research

ese
Profit After Tax 249.1 358.5 258.5 384.6
Source: Company, ICICI Direct Research

Exhibit 18: Balance sheet | crore Exhibit 19: Key ratios | crore
(Year-end March) FY21A FY22E FY23E FY24E (Year-end March) FY21A FY22E FY23E FY24E
Equity Capital 39.5 39.5 39.5 39.5 Per share data (|) -31%
Reserve and Surplus 1,245.1 1,547.0 1,766.7 2,093.6 EPS 12.6 18.2 13.1 19.5
Cash EPS 14.8 20.2 16.4 23.5
Total Shareholders funds 1,284.6 1,586.5 1,806.2 2,133.1
BV 65.0 80.3 91.5 108.0
Total Debt 556.4 1,301.5 1,300.2 1,034.2
DPS 0.6 1.5 2.0 2.9
Non Current Liabilities 94.3 91.3 92.5 93.8
Cash Per Share 6.4 20.0 7.8 4.0
Source of Funds 1,935.3 2,979.2 3,198.9 3,261.1 Operating Ratios (% )
EBITDA margins 15.0 18.2 14.3 15.7
Gross block 1,040.9 1,139.5 1,647.5 1,977.5 PBT margins 13.5 16.5 10.4 12.6
Less: Accum depreciation 500.6 541.5 607.4 686.5 Net Profit margins 9.9 12.2 8.0 9.7
Net Fixed Assets 540.3 598.0 1,040.1 1,291.0 Inventory days 104.0 132.5 127.0 110.0
Capital WIP 7.7 23.9 270.0 2.0 Debtor days 74.7 61.3 65.0 65.0
Intangible assets 2.7 2.9 2.9 2.9 Creditor days 34.0 18.4 22.0 25.0
Return Ratios (% ) 144.8 175.5
Investments 166.9 1.5 2.5 2.2
RoE 19.4 22.6 14.3 18.0
Inventory 718.0 1,068.0 1,118.4 1,191.4
RoCE 20.2 18.5 13.3 17.7
Cash 126.5 395.3 154.0 79.7
RoIC 24.1 21.6 15.4 18.2
Debtors 515.7 494.2 572.4 704.0
Valuation Ratios (x)
Loans & Advances & Other CA 191.2 304.9 335.3 368.9 P/E 9.7 6.7 9.3 6.3
Total Current Assets 1,551.5 2,262.3 2,180.1 2,343.9 EV / EBITDA 7.1 6.2 7.7 5.4
Creditors 234.6 148.0 193.7 270.8 EV / Sales 1.1 1.1 1.1 0.9
Provisions & Other CL 125.6 137.6 144.4 151.6 Market Cap / Revenues 1.0 0.8 0.7 0.6
Total Current Liabilities 360.2 285.7 338.2 422.4 Price to Book Value 1.9 1.5 1.3 1.1
Net Current Assets 1,191.3 1,976.7 1,841.9 1,921.5 Solvency Ratios
LT L& A, Other Assets 26.5 376.3 41.5 41.5 Debt / Equity 0.4 0.8 0.7 0.5
Other Assets 0.0 0.0 0.0 0.0 Debt/EBITDA 1.5 2.4 2.8 1.7
Application of Funds 1,935.3 2,979.2 3,198.9 3,261.1 Current Ratio 4.0 6.5 6.0 5.4
Source: Company, ICICI Direct Research Quick Ratio 2.0 2.8 2.7 2.5
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 8

 Sector Update | Textile ICICI Direct Research

Financial summary (Faze Three)

Exhibit 20: Profit and loss statement

ese
| crore Exhibit 21: Cash flow statement | crore
(Year-end March) FY21 FY22A FY23E FY24E (Year-end March) FY21 FY22A FY23E FY24E

Net Sales 324.2 504.5 565.0 655.4 Profit/(Loss) after taxation 25.0 51.1 57.8 71.5
Add: Depreciation 8.8 10.2 12.5 13.2
Growth (%) 7.3 55.6 12.0 16.0
Net Increase in Current Assets -44.7 -75.8 -31.9 -31.7
Total Raw Material Cost 151.6 218.8 261.0 301.5
Net Increase in Current Liabilities 10.8 11.1 5.4 1.4
Gross Margins (%) 53.2 56.6 53.8 54.0 CF from operating activities -0.1 -3.4 43.8 54.3
Employee Expenses 51.3 65.2 76.3 87.2 (Inc)/dec in Investments 0.0 -10.2 -1.0 -1.1
Other Expenses 73.5 140.9 140.7 161.2 (Inc)/dec in Fixed Assets -15.4 -43.0 -32.1 -15.0
Total Operating Expenditure 276.4 424.9 478.0 549.9 Others 5.7 1.7 0.0 0.0
EBITDA 47.8 79.6 87.0 105.5 CF from investing activities -9.7 -51.5 -33.1 -16.1
EBITDA Margin 14.7 15.8 15.4 16.1 Inc / (Dec) in Equity Capital 0.0 0.0 0.0 0.0
Interest 5.7 5.0 4.4 4.0 Inc / (Dec) in Loan 37.0 66.3 -31.6 -25.2
Depreciation 8.8 10.2 12.5 13.2 Others -1.0 2.6 0.0 0.0
Other Income 2.1 7.0 7.2 7.3 CF from financing activities 36.0 68.9 -31.6 -25.2
Net Cash flow 26.2 14.0 -20.8 13.0
Exceptional Expense - - - -
Opening Cash 16.3 42.4 56.5 35.6
PBT 35.4 71.4 77.2 95.6
Closing Cash 42.4 56.5 35.6 48.6
Total Tax* 10.4 20.3 19.4 24.1
Source: Company, ICICI Direct Research
Profit After Tax 25.0 51.1 57.8 71.5
Source: Company, ICICI Direct Research

Exhibit 22: Balance sheet | crore Exhibit 23: Key ratios | crore
(Year-end March) FY21 FY22A FY23E FY24E (Year-end March) FY21 FY22A FY23E FY24E
Equity Capital 24.3 24.3 24.3 24.3 Per share data (|)
Reserve and Surplus 201.8 254.0 311.8 383.3 EPS 10.3 21.0 23.8 29.4
Total Shareholders funds 226.2 278.3 336.1 407.6 Cash EPS 13.9 25.2 28.9 34.8
BV 93.0 114.4 138.2 167.6
Total Debt 91.6 157.9 126.3 101.1
DPS 0.0 0.0 0.0 0.0
Non Current Liabilities 11.0 12.5 12.5 12.5
Cash Per Share 17.5 23.2 14.6 20.0
Source of Funds 328.8 448.7 474.9 521.2
Operating Ratios (% )
EBITDA margins 14.7 15.8 15.4 16.1
Gross block 230.9 271.0 306.0 321.0 PBT margins 10.9 14.2 13.7 14.6
Less: Accum depreciation 100.0 110.2 122.7 135.9 Net Profit margins 7.7 10.1 10.2 10.9
Net Fixed Assets 130.9 160.8 183.2 185.1 Inventory days 78.6 83.3 80.0 75.0
Capital WIP 1.0 4.0 1.0 1.0 Debtor days 78.4 59.2 65.0 65.0
Intangible assets - 0.0 0.0 0.0 Creditor days 15.0 15.7 17.0 15.0
Investments 0.2 10.4 11.4 12.6 Return Ratios (% ) 142.1 126.8 128.0 125.0
RoE 11.1 18.4 17.2 17.5
Inventory 69.8 115.1 123.8 134.7
RoCE 12.9 17.5 17.7 19.6
Cash 42.5 56.5 35.6 48.6
RoIC 15.0 20.9 19.7 22.3
Debtors 69.7 81.8 100.6 116.7
Valuation Ratios (x)
Loans & Advances & Other CA 25.4 43.8 48.1 52.9
P/E 27.7 13.6 12.0 9.7
Total Current Assets 207.3 297.1 308.2 352.9 EV / EBITDA 15.5 9.9 8.9 6.9
Creditors 13.3 21.7 26.3 26.9 EV / Sales 2.3 1.6 1.4 1.1
Provisions & Other CL 14.4 17.3 18.0 18.8 Market Cap / Revenues 2.1 1.4 1.2 1.1
Total Current Liabilities 27.8 38.9 44.3 45.7 Price to Book Value 3.1 2.5 2.1 1.7
Net Current Assets 179.5 258.2 263.9 307.2 Solvency Ratios
LT L& A, Other Assets 17.1 15.3 15.3 15.3 Debt / Equity 0.4 0.6 0.4 0.2
Other Assets 0.0 0.0 0.0 0.0 Debt/EBITDA 1.9 2.0 1.5 1.0
Application of Funds 328.8 448.7 474.9 521.2 Current Ratio 5.9 6.2 6.1 6.7
Source: Company, ICICI Direct Research Quick Ratio 3.4 3.2 3.4 3.7
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 9

 Sector Update | Textile ICICI Direct Research

Financial summary (Vardhman Textiles)

Exhibit 24: Profit and loss statement

ese
| crore Exhibit 25: Cash flow statement | crore
(Year-end March) FY21P FY22E FY23E FY24E (Year-end March) FY21P FY22E FY23E FY24E
Total operating Income 6,139.9 9,622.3 10,481.1 11,460.2 PAT 414.4 1,546.9 796.2 1,147.6
Growth (%) -8.8 56.7 8.9 9.3 Add: Depreciation 363.8 367.5 424.7 444.5
Raw Material Expenses 3,260.5 4,560.7 6,191.2 6,340.0 (Inc)/dec in Current Assets -494.1 -646.8 -814.9 -467.5
Employee Expenses 590.1 729.1 838.5 916.8 Inc/(dec) in CL and Provisions -20.8 -10.3 116.9 -317.7
Mfg, Admin & selling Exps 1,475.5 2,058.7 2,114.0 2,368.8 Others 0.0 0.0 0.0 0.0
Total Operating Expenditure 5,326.0 7,348.4 9,143.7 9,625.6 CF from operating activities 263.3 1,257.4 523.0 806.9
EBITDA 813.8 2,273.9 1,337.4 1,834.6 (Inc)/dec in Investments 70.4 -616.5 101.5 -254.3
Growth (%) -13.2 179.4 -41.2 37.2 (Inc)/dec in Fixed Assets -274.5 -319.1 -700.0 -700.0
Depreciation 363.8 367.5 424.7 444.5 (Inc)/dec in CWIP 63.7 -163.3 -108.8 -130.0
Interest 113.3 99.7 110.4 139.2 Others -190.1 0.0 0.0 0.0
Other Income 201.6 224.5 209.6 229.2
CF from investing activities -330.4 -1,098.9 -707.4 -1,084.3
Exceptional income 0.0 0.0 0.0 0.0
Issue/(Buy back) of Equity 0.0 0.3 0.0 0.0
PBT 538.3 2,031.2 1,011.8 1,480.2
Inc/(dec) in loan funds -154.8 134.8 25.0 433.3
Total Tax 132.0 519.7 255.0 373.0
Others 34.7 -319.6 139.3 -168.4
PAT 406.3 1,511.5 756.8 1,107.2
CF from financing activities -120.1 -184.5 164.3 265.0
Minority Interest / Others 12.6 4.3 2.3 3.3
Net Cash flow -187.2 -26.0 -20.1 -12.4
PAT (after minority interest) 414.4 1,546.9 796.2 1,147.6
Growth (%) -28.3 273.3 -48.5 44.1
Opening Cash 279.9 92.6 66.6 46.5
EPS (|) 14.7 54.4 28.0 40.4 Closing Cash 92.6 66.6 46.5 34.1
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 26: Balance sheet | crore Exhibit 27: Key ratios | crore
(Year-end March) FY21P FY22E FY23E FY24E (Year-end March) FY21P FY22E FY23E FY24E
Liabilities Per share data (|)
Equity Capital 56.6 56.8 56.8 56.8 EPS 14.7 54.4 28.0 40.4
Reserve and Surplus 6,417.3 7,646.9 8,576.9 9,552.4 Cash EPS 27.5 67.4 43.0 56.0
Total Shareholders funds 6,473.9 7,703.8 8,633.8 9,609.3 BV 228.9 271.1 303.8 338.1
Total Debt 1,848.2 1,983.0 2,008.0 2,441.3 DPS 0.0 8.2 4.2 6.1
Deferred Tax Liability 256.9 249.1 249.1 249.1 Cash Per Share 3.3 2.3 1.6 1.2
Other LT Liabilities 20.8 22.0 25.3 29.1 Operating Ratios
Minority Interest / Others 133.2 137.5 139.8 139.8
EBITDA Margin (%) 13.3 23.6 12.8 16.0
Total Liabilities 8,733.0 10,095.4 11,055.9 12,468.5
PBT Margin (%) 8.8 21.1 9.7 12.9
Assets
PAT Margin (%) 6.6 15.7 7.2 9.7
Gross Block 8,332.6 8,651.8 9,351.8 10,051.8
Inventory days 166.2 135.0 140.0 140.0
Less: Accu Depreciation 4,793.6 5,161.1 5,585.8 6,030.3
Debtor days 61.7 48.0 46.0 46.0
Net Block 3,539.1 3,490.7 3,766.0 4,021.5
Creditor days 33.5 35.0 35.0 35.0
Capital WIP 78.0 241.2 350.0 480.0
Total Fixed Assets 3,617.0 3,731.9 4,116.0 4,501.5 Return Ratios (%)
Investments 1,074.5 1,691.1 1,589.6 1,843.9 RoE 6.4 20.1 9.2 11.9
Inventory 2,796.1 2,882.3 4,020.2 4,395.7 RoCE 5.5 21.2 9.0 12.3
Debtors 1,038.6 1,321.2 1,320.9 1,444.3 RoIC 6.4 24.8 10.5 14.3
Loans and Advances 2.7 3.0 31.4 0.0 Valuation Ratios (x)
Other Current Assets 688.4 966.0 615.0 615.0 P/E 17.4 4.7 9.1 6.3
Cash 92.6 66.6 46.5 34.1 EV / EBITDA 11.0 4.0 6.9 5.3
Total Current Assets 4,618.5 5,239.2 6,034.0 6,489.1 EV / Net Sales 1.5 1.0 0.9 0.8
Creditors 874.3 864.4 987.5 663.7 Market Cap / Sales 1.2 0.8 0.7 0.6
Provisions 19.7 19.3 13.2 19.2 Price to Book Value 1.1 0.9 0.8 0.8
Total Current Liabilities 894.0 883.7 1,000.6 683.0 Solvency Ratios
Net Current Assets 3,724.5 4,355.5 5,033.4 5,806.1 Debt/EBITDA 2.3 0.9 1.5 1.3
Others Assets 317.0 317.0 317.0 317.0 Debt / Equity 0.3 0.3 0.2 0.3
Application of Funds 8,733.0 10,095.4 11,055.9 12,468.5 Current Ratio 5.3 6.1 6.1 9.8
Source: Company, ICICI Direct Research
Quick Ratio 2.1 2.7 2.0 3.2
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 10

 Sector Update | Textile ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities | Retail Research 11

 Sector Update | Textile ICICI Direct Research

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ICICI Securities | Retail Research 12