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For 3QFY2011, Page Industries reported a stellar set of numbers, above our
expectations. The company posted strong revenue growth, led by volume growth
and higher price realisation. OPM also came in above our estimates, which we
believe is not sustainable going ahead due to increasing raw-material prices.
Strong top-line growth: During the quarter, Page Industries’ top line grew
impressively by 49% yoy and 6% qoq to `134cr, while EBITDA grew by 81% yoy
and 7% qoq to `28cr. Operating margin came in at 20.7% thereby expanding by
360bp yoy and 20bp qoq.
Robust profitability growth: The company posted robust PAT growth of 74% yoy to
`15.6cr. PAT margin stood at 11.7%, expanding by 170bp yoy.
Outlook and valuation: Considering the immense potential of India’s
consumption story, Page Industries’ predominant presence in a fast-growing
market, strong brand recall and consistent financial performance, we remain
positive on the stock. As per our revised estimates, Page Industries would witness
a PAT CAGR of 34% over FY2010–12E. For FY2011E and FY2012E, we have
revised our EPS estimates to `48.5 and `64, respectively. Assigning a P/E multiple
of 24x for FY2012E earnings, we have arrived at a fair price of `1,536 for Page
Industries. Hence, we recommend a Neutral rating on the stock.
Higher operating margins, but not sustainable going forward
During the quarter, Page Industries’ operating margin expanded by 20bp qoq to
20.7%, primarily due to inventory gains. Also, the company had undertaken a
price revision to maintain its margins.
Since prices of cotton yarn, a primary raw material, have been continuously rising,
going forward, we believe these margins are not sustainable. We have estimated
EBITDA (excl. OI) margin at 18.6% for FY2011E and FY2012E.
Robust PAT growth of 74% yoy
During the quarter, Page Industries posted a phenomenal growth of 74% yoy in its
net profit to `15.6cr, but it reported a 450bp decline qoq. PAT margin stood at
11.7%, expanding by 170bp yoy and declining by 120bp qoq. Sequentially,
interest cost for the quarter increased by 8%. Also, tax expense as a percentage of
PBT stood at 41.6% vis-à-vis 32.2% for 2QFY2011, up by 940bp. Going forward,
we believe the company’s PAT margin would stabilise in line with its operating
margin and normalised tax expenses. We have estimated PAT margins at 11% and
10.9% for FY2011E and FY2012E, respectively.
Investment rationale
Exclusive licensee for JOCKEY® through 2030
Page Industries has entered into a new licensing agreement with Jockey
International, which makes Page Industries the exclusive licensee to manufacture
and distribute JOCKEY® brand of products, up to the end of CY2030. Under this
agreement, United Arab Emirates (UAE) will be added to the list of the existing
markets served by Page Industries. In essence, this agreement of exclusivity for 20
years, of a well-renowned global brand, lends good growth visibility to
Page Industries.
Huge market size, with a fast-growing premium segment
We estimate the current potential national innerwear and leisurewear market size
at `15,600cr. In India, JOCKEY® is positioned as a premium innerwear and
leisurewear brand, catering to the premium and super-premium segments.
We estimate the current market potential of these segments at `3,740cr.
At present, Page Industries is the market leader with a 14.4% market penetration
level in these segments.
Strong brand recall and a wide distribution network
JOCKEY® is one of the most trusted and well-respected innerwear brands in India.
The company’s advertising and branding budget is a good ~6% of its net sales.
In addition, Page Industries commands a wide, pan-India distribution network,
encompassing 16,000 retail outlets in 1,100 cities and towns.
Outlook and valuation
Considering the immense potential of India’s consumption story, the company’s
predominant presence in a fast-growing market, strong brand recall and
consistent financial performance, we remain positive on the stock. We have revised
our numbers on account of better-than-expected estimates.
Estimating the company’s PAT to witness a 34% CAGR over FY2010–12E, we have
revised our EPS estimates to `48.5 and `64 for FY2011E and FY2012E,
respectively. Assigning a P/E multiple of 24x for FY2012E earnings, we have
arrived at a fair price of `1,536 for Page Industries. Hence, we assign a Neutral
rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Page Industries – 3QFY2011 Result Update
Angel Broking recommends a Neutral on Page Industries.
For 3QFY2011, Page Industries reported a stellar set of numbers, above our
expectations. The company posted strong revenue growth, led by volume growth
and higher price realisation. OPM also came in above our estimates, which we
believe is not sustainable going ahead due to increasing raw-material prices.
Strong top-line growth: During the quarter, Page Industries’ top line grew
impressively by 49% yoy and 6% qoq to `134cr, while EBITDA grew by 81% yoy
and 7% qoq to `28cr. Operating margin came in at 20.7% thereby expanding by
360bp yoy and 20bp qoq.
Robust profitability growth: The company posted robust PAT growth of 74% yoy to
`15.6cr. PAT margin stood at 11.7%, expanding by 170bp yoy.
Outlook and valuation: Considering the immense potential of India’s
consumption story, Page Industries’ predominant presence in a fast-growing
market, strong brand recall and consistent financial performance, we remain
positive on the stock. As per our revised estimates, Page Industries would witness
a PAT CAGR of 34% over FY2010–12E. For FY2011E and FY2012E, we have
revised our EPS estimates to `48.5 and `64, respectively. Assigning a P/E multiple
of 24x for FY2012E earnings, we have arrived at a fair price of `1,536 for Page
Industries. Hence, we recommend a Neutral rating on the stock.
Strong revenue growth
Page Industries reported strong revenue growth, primarily on the back of robust
volume growth and an increase in price realisations. The company reported net
sales of `134cr, thereby recording yoy growth of 49.4% and qoq growth of 6.1%.
Higher operating margins, but not sustainable going forward
During the quarter, Page Industries’ operating margin expanded by 20bp qoq to
20.7%, primarily due to inventory gains. Also, the company had undertaken a
price revision to maintain its margins.
Since prices of cotton yarn, a primary raw material, have been continuously rising,
going forward, we believe these margins are not sustainable. We have estimated
EBITDA (excl. OI) margin at 18.6% for FY2011E and FY2012E.
Robust PAT growth of 74% yoy
During the quarter, Page Industries posted a phenomenal growth of 74% yoy in its
net profit to `15.6cr, but it reported a 450bp decline qoq. PAT margin stood at
11.7%, expanding by 170bp yoy and declining by 120bp qoq. Sequentially,
interest cost for the quarter increased by 8%. Also, tax expense as a percentage of
PBT stood at 41.6% vis-à-vis 32.2% for 2QFY2011, up by 940bp. Going forward,
we believe the company’s PAT margin would stabilise in line with its operating
margin and normalised tax expenses. We have estimated PAT margins at 11% and
10.9% for FY2011E and FY2012E, respectively.
Investment rationale
Exclusive licensee for JOCKEY® through 2030
Page Industries has entered into a new licensing agreement with Jockey
International, which makes Page Industries the exclusive licensee to manufacture
and distribute JOCKEY® brand of products, up to the end of CY2030. Under this
agreement, United Arab Emirates (UAE) will be added to the list of the existing
markets served by Page Industries. In essence, this agreement of exclusivity for 20
years, of a well-renowned global brand, lends good growth visibility to
Page Industries.
Huge market size, with a fast-growing premium segment
We estimate the current potential national innerwear and leisurewear market size
at `15,600cr. In India, JOCKEY® is positioned as a premium innerwear and
leisurewear brand, catering to the premium and super-premium segments.
We estimate the current market potential of these segments at `3,740cr.
At present, Page Industries is the market leader with a 14.4% market penetration
level in these segments.
Strong brand recall and a wide distribution network
JOCKEY® is one of the most trusted and well-respected innerwear brands in India.
The company’s advertising and branding budget is a good ~6% of its net sales.
In addition, Page Industries commands a wide, pan-India distribution network,
encompassing 16,000 retail outlets in 1,100 cities and towns.
Outlook and valuation
Considering the immense potential of India’s consumption story, the company’s
predominant presence in a fast-growing market, strong brand recall and
consistent financial performance, we remain positive on the stock. We have revised
our numbers on account of better-than-expected estimates.
Estimating the company’s PAT to witness a 34% CAGR over FY2010–12E, we have
revised our EPS estimates to `48.5 and `64 for FY2011E and FY2012E,
respectively. Assigning a P/E multiple of 24x for FY2012E earnings, we have
arrived at a fair price of `1,536 for Page Industries. Hence, we assign a Neutral
rating to the stock.
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