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Expanding its tentacles

Page Industries, an exclusive licensee of Jockey USA in India and neighboring countries, has established market leadership in men premium innerwear and women lingerie segments. With 70% in-house manufacturing, Page has strong control over its cost structure. It has developed pan India distribution network selling through multiple channels of – MBOs, EBOs, LFS and E-commerce. We believe that Page has all the required ingredients - strong brand pull, pan India reach, widest range of product portfolio, technological infrastructure and clean balance sheet to continue its compounding journey. We remain bullish on Page and expect its sales/EBITDA/PAT to grow at CAGR of 18%/22%/26% over FY20-24E. We initiate on Page with a Buy rating and TP of Rs51,458 with target multiple of 66x.

Aggressive retail footprint expansion

Over FY12-22 number of Jockey EBOs have increased 15 times to 1030 while MBO reach has expanded 5-fold to 105,000 outlets. Over the same time frame Jockey’s geographic reach has more than doubled to 2,850 cities. During the two years of pandemic, Jockey expanded aggressively in tier II/III towns and doubled its MBO reach. Number of EBOs too increased by 1.6x over FY19-22. As per our channel checks smaller towns are now contributing 25-30% to the total sales. We expect Page to increase its retail footprint by CAGR 15-20% over the next two years.

In-house manufacturing a key economic moat

During the pandemic clear winners were those companies with in-house manufacturing while those which relied on vendors faced supply issues and increased labour cost. PAG, with a 70% in-house manufacturing capacity of 260mn pieces per year (9% CAGR over FY12-22) is well positioned to continue to enjoy the benefits of in-house manufacturing. With own setup, the company is able to monitor every stage of manufacturing process including designing, raw materials, production process, packaging and final products

Strong financial performance

Over FY10-20 (excluded FY21 due to pandemic impact) Jockey’s sales/EBITDA/PAT has grown at CAGR of 24% each. Despite scaling up the business by 9x over the last decade, the company remains debt free and cash and cash equivalent of Rs5.4bn as of 1HFY22. Average RoCE and RoIC over the last five years stood at 43% and 44% respectively. Cumulative FCF generation stood at Rs19.2bn over FY17-21 and expect to be at Rs25bn over FY21-24E.

Valuation

We expect sales/EBITDA/PAT to grow at CAGR of 18%/22%/26% over FY20-24E with EBITDA margins to reach 21% by FY24E. We initiate on Page with a Buy rating and TP of Rs51,458 with target multiple of 66x. Our target multiple is in-line to its last three year PE multiple

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