Shares of Indo Count Industries have surged over 80% since the start of the year, but analysts at ICICI Direct see further rally as they think that most of the negatives are behind the company and it is poised for steady recovery in FY24 (April 2023-March 2024).

The Indo Count Industries Analyst: Cheragh Sidhwa for ICICI Direct assigned a ‘buy’ rating for the stock with a target price of ₹295. The target indicates an around 20% upside from the stock’s last closing price of ₹246.65.

The Indo Count Industries Thesis: The analysts noted that in the fiscal year 2023 (April 2022-March 2023), India’s home textile export market encountered various challenges, including high domestic cotton prices and excess inventory buildup among US retailers. The analysts pointed out that despite these difficulties, Indo Count demonstrated resilience in FY23, with a minimal 1% decline in volumes compared to the industry’s substantial contraction of approximately 32%.

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The analyst further added that now, the industry is witnessing signs of recovery as global retailer inventory levels gradually normalise. Additionally, India has managed to regain its lost market share in the USA for Cotton sheets, with a rise from around 50% in the calendar year 2022 to 58% in the year-to-date period of 2023 (January to June).

As per the firm, the Mukul Agrawal-backed company is also experiencing growth in business and an improved order book position in anticipation of the upcoming holiday season. The analyst anticipates a substantial 18% YoY volume increase in FY24.

The firm also highlighted that the Indian government’s strategic initiatives, such as entering into free trade agreements (FTAs) with multiple nations and maintaining a consistent export incentive policy, are set to offer strong prospects for Indian exporters. As per the brokerage, leveraging its substantial production capacity, ICIL is well-positioned to capitalise on these favourable circumstances.

Price Action: Indo Count’s share price was up 1.22% to trade at ₹249.65 in early trade on Wednesday.

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