Interloop Limited plans achieving US$700mn revenue by 2025

Interloop Limited (ILP) conducted its corporate briefing session to discuss FY22 and 1QFY23 financial results and the company’s future outlook.

The company presented their vision for 2025, which is based on achieving US$700mn revenue by 2025 by transforming itself into a full-family clothing business. ILP wants to increase its revenue from value-added services by 2.5x. This includes supply chain & warehousing advisory services, 3D Design and cotton traceability from farm to the final product.

The current annual production capacity of the company stands at 795mn pairs of socks under the Hosiery segment, 6mn Denim, 22mn Apparel, and 4mn Active Wear. The utilization of these capacities was 75-80% for Hosiery, 88% for spinning, 88% for Yarn and 80% for Denim in 1QFY23.

The apparel complex is expected to come online by 4QFY23. The CAPEX for this project is expected to be US$100mn, with Civil works in progress and machinery ordered. The capacity of this project is 84k pieces per day. After the completion of the apparel complex, the company will start work on Hosiery plant 6 from the beginning of FY24 with a CAPEX of US$60mn.

ILP has a total solar generation capacity of 7.9MW, with 1.9MW added in FY22.

Revenue contribution for FY22 from Australia, Asia, Europe, USA, and Pakistan stands at 0.08%, 6.5%, 32.4%, 53.4% and 7.6%, respectively. ILP expects to achieve US$500mn in revenue in FY23 since ILP products are relatively demanded inelastic, and the company also sustained revenue in the last recession (2008).

ILP management expects the 2QFY23 to be tough due to issues in their two major markets. USA orders have slowed down due to inventory pile-ups at major retailers. Supply chains facing bottlenecks during COVID have improved, leading to retailers receiving orders earlier than expected. From 3QFY23, the company expects order flow to start improving from the USA. The company expects Europe’s slowdown to be longer-term since the continent is facing an energy crisis-linked inflationary period.

The denim segment reached the breakeven level and became slightly profitable in 1QFY23. However, the management expects the project to achieve scale from FY24 onwards since efficiencies are currently not up to the mark. The selling price per piece was US$10 in 1QFY23.

Due to lower international cotton prices, the price of all the items sold by ILP will decrease with a lag.

To recall, the company posted a net profit of Rs4.96bn (EPS: Rs5.3), up 84% YoY in 1QFY23.

Courtesy- Topline Securities

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