Strong growth potential, await shift in sentiments...
Page Industries Ltd. is engaged in the manufacturing, distribution and marketing of Innerwear, Athleisure, Sleepwear and Swimwear for men, women and kids.
* Robust revenue growth momentum with 17% CAGR in top-line for the last 5 years.
* Innerwear market in India expected to grow at 12% CAGR in the next decade to Rs743bn from Rs290bn at present. While Page’s increasing penetration will provide strong potential to grow.
* Innerwear is evolving from being functional to a segment with a fashion quotient, also shifting from price sensitive category to a brand sensitive one.
* Strong margin, debt free status and doubling of capacity by 2025 will help to tap vigorous opportunity in the sector.
* Higher asset turnover ratio, healthy dividend payout and better working capital management led to consistent improvement in ROE/ROCE.
* We expect most of the negatives owing to pandemic are factored in, while discretionary spending is expected to pick-up from H2FY21. We initiate coverage on PAGEIND with Buy rating and value at P/E of 60x on FY22E with a target price of Rs24,605.
Strong potential for growth…
Jockey is the fast growing middle and premium segment innerwear of the men’s and women’s category with a market share of 8% to 9% in the highly unorganised market. In the last five years Page registered 17% revenue CAGR due to brand consciousness and quality of product which led to better volume and realisation growth. Jockey currently holds 19-20% market share in men’s premium innerwear, 5%-6% in women’s and 6%-8% in premium Athleisure. We expect the demand for premium innerwear to grow further due to a change in preference to branded product and quality. Jockey’s given strong brand recall, product innovation and customer loyalty will help the company to mitigate rising competition.
Doubling of capacity to tap premium market segment...
Page has a capacity to produce 26cr pieces a year with a capacity utilization of about 60% -70%. The total installed capacity is spread over 2.4mn sq ft in 14 locations in Karnataka and one in Tamil Nadu. To meet the growing market demand and to tap the premium market potential the company is looking to double its current capacity in the next five years. Currently, the company is setting up a manufacturing facility of 0.6 mn sq ft in Anantapur (AP) to meet the growing demand of Men’s business. The plant’s operation is expected to commence from Q4FY21. It also has a new plant in Mysore with 0.2mn sq ft, for manufacturing & raw material warehousing has started operation during FY20.
Significant expansion in stores
The Company has significantly expanded its presence in the Indian market, by opening many Exclusive Brand Outlets (EBO’s) and through expansion in Multi Brand Outlets (MBO’s) making the brands available to consumers across the entire length and breadth of the country. The brand Jockey is available in over 66,000+ outlets spread across India. In the last two years, company opened 300+ EBO’s, taking the total number of EBO’s to 756, contributing 16%-17% to topline. The company targets to increase EBO’s to 1,000 by FY21, which will further enhance the revenue mix from EBO’s.
Valuation & Outlook…
Rising urbanization and increasing preference for branded product, the innerwear segment is likely to grow at a faster pace. Higher asset turnover ratio, higher dividend pay-out and better working capital management led to consistent improvement in ROE/ROCE. The premium valuation to sustain due to healthy financial ratios and debt free status. We initiate coverage on Page Industries with Buy rating with a target price of Rs24,605, based on a P/E of 60x FY22 EPS.
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