Here Is A Stock To Buy Next Week That Can Give Up To 50% Returns

With normal activity fast resuming across the globe, the one stock that can benefit is textile major Indo Count Industries, which is a big exporter as well. Here is why Anand Rathi is bullish on the stock and has recommended a buy on the stock. With markets falling this week and prices available lower, it would be a good time to buy the stock next week.

Buy with a price target of Rs 334

The brokerage has set a price target of Rs 334 on the stock of Indo Count Industries as against the current market price of Rs 207. This implies a more than 50% returns on the stock.

Indo Count Industries reported consolidated revenues of Rs 7,564 million, de-growth of 3.4% year over year. Sales Volume during Q3FY22 were 21.1 million meters as against 18.9 million meters during Q2FY22. With the recurrence of third wave of pandemic across key geographies like US, UK and Europe, the company is witnessing lower demand.

"The intensity is reflected in the demand projections shared by their customers. The Management revised their Revenue Guidance to Rs. 30,000 million for FY22, lower than their previous estimates of Rs. 32,000 million. The Volume guidance for FY22 was also revised to 75 million meters from earlier 85-90 million meters," Anand Rathi has said in their report.

Indo Count: Better product mix

According to Anand Rathi, the current sales profile has seen a shift to better product mix. For 9M FY22 Branded business contributed 14% to Revenue, Fashion/Utility/ Institutional contributed 19% to the overall Revenue. Ecommerce Business Sales were 6% of overall revenue. The Company has been strongly moving towards B2C and D2C segment through high quality product offerings across varied price points, building visibility through digital campaigns and leveraging omnichannel & e-commerce distribution.
 
The acquisition of Home Textiles business of GHCL has added almost 50% new capacity. With this Indo Count Industries becomes the largest Home Textile Bedding company, globally, with annual capacity of approximately 153 million meters. The overall purchase Consideration for the said transaction is Rs. 576 crores which will be funded through mix of internal accruals and debt. The company aims Potential addition of Rs. 1,300 - 1,500 Crores p.a. to the top line over a period.

Some headwinds

According to the brokerage the Indian home textile industry has been witnessing headwinds related to shortages and unavailability of shipping containers, increase in freight costs and longer transit duration. The inflationary pressure on logistics and supply chain is likely to persist for short term.

"While there may be some short-term challenges, Indo Count Industries remain positive about the demand scenario in the long run on the back of China + 1 strategy, the US prohibition on Xinjiang cotton, and government steps to support the Indian home textile export market," the brokerage has said.

Healthy Balance sheet

According to Anand Rathi, Indo Count Industries is well prepared to seize every opportunity on the back of their healthy balance sheet, financial prudence, and focused approach.

"With planned expansion and tailwinds in the Textile sectors, we expect Indo Count Industries to perform well. We recommend BUY on the stock with a target price of Rs.334 per share," the brokerage has said.