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Interloop Reaffirms Buy Rating Despite Reduced Target Price Amid Expanding Operations

Faisalabad: Interloop Limited (ILP), a leading textile manufacturer, has maintained its Buy rating, though with a revised target price of Rs90, indicating a potential upside of 30%. This adjustment reflects a 10% reduction from the previous target price, influenced by recent shifts in tax regulations affecting the company's future profitability forecasts.

According to JS Global, ILP's outlook remains strong despite the introduction of a new tax regime, which has escalated its effective tax rate to 39%, significantly impacting earnings. The company anticipates maintaining its robust annual revenue growth of 25%, backed by a substantial $92 million expansion plan aimed at boosting its export capabilities. This strategic investment is expected to increase ILP's export revenue to $671 million by FY25. Additionally, the recent reduction in power costs is seen as a positive development that will support the company's profitability.

The report details the effects of these changes on ILP’s financial strategy and bottom line. A significant portion of the company’s future capital expenditures, projected at Rs30 billion for FY25-26, is expected to be debt-financed, reflecting a strategic use of leverage to support growth. This is aligned with a reduction in the Weighted Average Cost of Capital (WACC) from 19% to 16%, further facilitating the company's expansion efforts.

ILP's aggressive growth strategy is not limited to its financial adjustments. The company plans to increase its hosiery segment capacity by 25% to 1,034 million pairs by the first quarter of FY26. Additionally, there is a planned 2.4x capacity expansion in its denim segment by the fourth quarter of FY26, responding to increased demand from major retail brands. These expansions are set to solidify ILP’s position in the textile market, enabling it to meet growing global demand effectively.