Results below expectations: Indo Count Industries’ (ICNT) 1QFY17 revenues rose 7.6% to INR4.9b (est. of INR5.4b) from INR4.6b in 1QFY16. Volumes grew 7.3% to 13.46m mtrs from 12.54m mtrs in 1QFY16. EBITDA grew 9% to INR1,103m (est. of INR1,257m) from INR1,012m in 1QFY16. EBITDA margin rose 30bp to 22.4% (est. of 23.3%) from 22.1% in 1QFY16. Gross margin fell 270bp to 48.3%, offset by a 350bp fall in other expenses to 20.5% from 24% in 1QFY16. Consequently, PAT grew 15.6% YoY to INR603m (est. INR729m).

Valuation: They slightly cut FY17E/ FY18E PAT by 4.5% due to its weak-than-expected 1QFY17 results. With a unique asset light business model, ICNT enjoys robust capital efficiency. With its foray into products like fashion, institutional linen and utility bedding, we expect 17% revenue CAGR and 28% PAT CAGR over FY16-18. Maintain Buy with TP of INR1,321 (12x FY18E EPS).