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Firing on all cylinders!

Page Industries had another strong quarter with sequential growth of 21%. Robust demand continued across the products, channels and geographies. Gross margins declined though sequentially by 500bps to 54.5% however, were well within the range of margins achieved in 1QFY20. EBITDA, PBT and PAT grew by healthy 12%, 12% and 9% respectively on a YoY basis. EBITDA margins stood at healthy level of 22.2%. Page has almost doubled its MBO reach from 66k to 1.14L outlets and EBO reach to 1144 over FY20-1QFY23. We maintain our bullish stance and Buy rating on the stock. We increase our EPS estimates by 18/17% for FY23/24 respectively. We continue to value the business at 66x with new target price of Rs59,775.

Aggressive retail footprint expansion’s benefit to reflect in FY23/24

Page did aggressive retail footprint expansion across its multiple channels. Jockey’s Exclusive Business Outlets (EBOs) have increased from 750 in FY20 to 1144 in 1QFY23. Despite significant addition of EBOs, EBOs continue to register robust double digit growth for several quarters. The company’s MBO reach has also almost doubled from 66k to 1.14L outlets over the same time frame. Footprint expansion has come across tier I/II/III towns. Apart from this, company’s stores in LFS have gone up from 2,000 to 3,026 over FY20-1QFY23. As per the management, there is healthy premiumization trend observed in tier II/III towns. We believe that the full impact of expansion and premiumization will be realized fully during FY23/24.

Healthy capacity expansion on cards

Currently, company’s in-house vs. outsourcing stands at 70:30%. The vendors who do the job work is an extended arm of Page who maintain the similar quality. Current capacity utilization is at 80% and company can cater to a year’s demand from the existing facility. Page is expanding aggressively at its elastic plant since it’s the most vital part of the product. Page’s new unit in Odisha is expected to commence by 4QFY22. The company is also investing in its backward integration project and strengthening its IT

Kids, Speedo and international markets remain optionality plays

Kids business continue to grow in-line with the company’s growth. The company has merged its kid’s category with women since it’s usually mothers who buy for their kids. After merging of the business company has seen healthy growth in terms of retail touch points. Kids’ category has grown at upwards of 25% for Page. International business is 1% of total sales however management see these markets to be a huge potential. The company has now dedicated leadership for international markets. Apart from this, Speedo brand has picked up very well and getting healthy traction.

Valuation

We believe Page is operating in a virtually monopolistic industry where the second best competitor is at 1/10th of its scale. Strong retail footprint expansion, healthy pricing power and solid leadership in place should allow Page to grow it sales at 33/21% each for FY23/FY24. We expect its EBITDA margins to improve from 20.2% to 22.6% by FY24. We maintain our Buy rating on the stock and increase our EPS estimates by 18/17% for FY23/24 respectively. We continue to value the business at 66x with TP of Rs59,775.

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