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We attended the analyst meet of Rupa & Co (Rupa). We
present below the key takeaways from the meet. Amongst
the listed innerwear players we continue to like Page
Industries.
Present in fast growing underpenetrated men’s innerwear
segment
India’s domestic branded innerwear market is currently
valued at Rs13,000 crore (CRISIL estimate) of which men’s
innerwear segment is worth close to Rs5500 crore. The
men’s segment has grown at a compounded annual growth
rate (CAGR) of 12.7% over the last four years and is
expected to grow at 17.3% for the next three years.
Further, the penetration of brands is abysmally low in
India, providing huge opportunity for branded players to
encash on the strong consumer wave.
Largest men’s innerwear company with bouquet of brands
Rupa is the largest men’s innerwear player by volume (in
FY2011, it sold 168 million pieces). It has presence across
the value chain with products in categories ranging from
basic to mid premium, premium and super premium
(entered into the last category recently). Its flagship
brands Rupa, Frontline, Jon and Air are in the basic and
mid premium categories while brands like Euro, Macro
Man and Macro Man M Series target the premium and
super premium categories.
Strong distribution reach—deep and wide
The company sells its products through multi-brand
outlets, hosiery stores and national chain stores. It does
not have any exclusive outlets at present. It has an
enviable distribution network, serving one lakh retail
outlets through a strong network of 950 distributors.
All set to focus on high-end premium and super
premium category
Amongst the three listed innerwear players, Rupa earns
relatively lower operating profit margin (OPM) in the band
of 10-11% vs 18-19% enjoyed by the peers Page Industries
and Lovable Lingerie. This is largely due to the fact that
the company is present in mainly mass and basic segments
because of which it has to compete with unbranded/
regional players. Its margins are therefore low. In an effort
to enhance its margins, productivity and move up the
value chain the company is now focusing on the premium
and super-premium brands like Macro Man, Macro Man M
Series and Euro.
Raw material sensitivity high: Its basic products constitute
around 40% of its overall top line. Thus Rupa’s margins
and volumes are most sensitive to the vagaries of the
raw material prices (cotton yarn), as the brands/products
compete with the regional/unbranded players. Thus any
sharp movement leads to a constant revision in the price
of the final product and in the margin.
We prefer Page Industries: Amongst the listed innerwear
players, we continue to be bullish on Page Industries,
given its superior growth levels, brand equity strength
(which is creating strong entry barrier for new players),
enviable margins, return ratios (best in the industry,
averaging 45-48%), and proactive management approach
(it has now entered the swimwear and sportswear
categories by bagging the exclusive Speedo licence for
Indian operations).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We attended the analyst meet of Rupa & Co (Rupa). We
present below the key takeaways from the meet. Amongst
the listed innerwear players we continue to like Page
Industries.
Present in fast growing underpenetrated men’s innerwear
segment
India’s domestic branded innerwear market is currently
valued at Rs13,000 crore (CRISIL estimate) of which men’s
innerwear segment is worth close to Rs5500 crore. The
men’s segment has grown at a compounded annual growth
rate (CAGR) of 12.7% over the last four years and is
expected to grow at 17.3% for the next three years.
Further, the penetration of brands is abysmally low in
India, providing huge opportunity for branded players to
encash on the strong consumer wave.
Largest men’s innerwear company with bouquet of brands
Rupa is the largest men’s innerwear player by volume (in
FY2011, it sold 168 million pieces). It has presence across
the value chain with products in categories ranging from
basic to mid premium, premium and super premium
(entered into the last category recently). Its flagship
brands Rupa, Frontline, Jon and Air are in the basic and
mid premium categories while brands like Euro, Macro
Man and Macro Man M Series target the premium and
super premium categories.
Strong distribution reach—deep and wide
The company sells its products through multi-brand
outlets, hosiery stores and national chain stores. It does
not have any exclusive outlets at present. It has an
enviable distribution network, serving one lakh retail
outlets through a strong network of 950 distributors.
All set to focus on high-end premium and super
premium category
Amongst the three listed innerwear players, Rupa earns
relatively lower operating profit margin (OPM) in the band
of 10-11% vs 18-19% enjoyed by the peers Page Industries
and Lovable Lingerie. This is largely due to the fact that
the company is present in mainly mass and basic segments
because of which it has to compete with unbranded/
regional players. Its margins are therefore low. In an effort
to enhance its margins, productivity and move up the
value chain the company is now focusing on the premium
and super-premium brands like Macro Man, Macro Man M
Series and Euro.
Raw material sensitivity high: Its basic products constitute
around 40% of its overall top line. Thus Rupa’s margins
and volumes are most sensitive to the vagaries of the
raw material prices (cotton yarn), as the brands/products
compete with the regional/unbranded players. Thus any
sharp movement leads to a constant revision in the price
of the final product and in the margin.
We prefer Page Industries: Amongst the listed innerwear
players, we continue to be bullish on Page Industries,
given its superior growth levels, brand equity strength
(which is creating strong entry barrier for new players),
enviable margins, return ratios (best in the industry,
averaging 45-48%), and proactive management approach
(it has now entered the swimwear and sportswear
categories by bagging the exclusive Speedo licence for
Indian operations).
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