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ICICI Direct Report
Indo Count Industries Ltd. reported a resilient performance in Q1 FY23 with gross margins (low cost inventory) saving the day. It has completed acquisition of the home textile business of GHCL Ltd., which is reflected in the current quarter's revenue.
Overall volumes for the quarter were at 19.1 million metre (up 6% YoY). Excluding GHCL volumes, we expect volumes to have declined 22% YoY.
We believe the company has utilised most of its low cost cotton inventory, which has resulted in Indo Count reporting abnormally higher gross margins of 62% (versus average 51-54%).
The significant delta in gross margins (up 730 basis points YoY) more than negated the negative impact of higher operating cost due to integration with GHCL and negative operating leverage (employee and other expenses as percentage to sales rose 346 bps YoY, 511 bps, respectively).
Hence, Ebitda margin decline was restricted to 120 bps at 17.3% (up 270 bps QoQ).
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