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India Equity Research Reports, IPO and Stock News
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http://content.icicidirect.com/mailimages/ICICIdirect_IndianInnerwearSector_InitiatingCoverage.pdf
A l o n g t h e c o n s u m p t i o n b a n d w a g o n !
The Indian apparel sector is expected to grow from | 1,709 billion in 2010
to | 4,700 billion by 2020E, representing a CAGR of 10.6%. Of this, the
innerwear market currently valued at ~ | 14,300 crore (in 2011) is
expected to grow to | 43,700 crore by 2020E, growing at a CAGR of
13.2%, outpacing the growth of the overall apparel market. Also, the
women’s segment that has historically been smaller in size compared to
the men’s segment is expected to grow at a faster pace (CAGR of 15%
over 2010-2020E as compared to 10% CAGR in the men’s segment). The
women’s innerwear segment is likely to touch | 30,000 crore from the
current | 8,500 crore. On the other hand, the men’s innerwear segment is
likely to grow from | 5,800 crore in 2010 to | 13,700 crore in 2020E.
Improving Indian demographics and increased preference for proper fits,
sizes, etc. lend credence to the growth of organised players in the Indian
innerwear market. Organised players (including Page Industries, Lovable
Lingerie and Rupa & Company, among listed players) are well poised to
capture this growth. We are initiating coverage on the Indian innerwear
space with a BUY rating on Page Industries. Based on the current
valuations, we believe that the upside potential in Lovable Lingerie is
limited and, hence, have a HOLD rating on the same.
Shift from unorganised to organised segment to aid overall growth
The Indian apparel market has been witnessing a shift towards the
organised segment. The share of the organised segment in the overall pie
has increased from 13% in 2005 to 16% in 2010 and the same is expected
to go up to 40% in 2020E. The organised apparel market is expected to
grow at a CAGR of 21.3% during 2010-2020E (faster than the overall
apparel industry, which is slated to grow at 10.6%). This augurs well for
organised players.
Higher share of premium products to aid margin expansion
The premium and super-premium category in both the men’s and
women’s segment has witnessed a higher growth than other segments.
With increasing disposable incomes and customers’ willingness to shell
out more for better quality products, domestic innerwear manufacturers
are working towards increasing the share of premium products in their
product portfolio. On the back of this, we expect a margin expansion in
the range of 50–250 bps (across our innerwear coverage universe) by
FY14E.
Sector multiple lower than that of consumption stocks
We believe the stocks in the innerwear segment like Page Industries,
Lovable Lingerie and Rupa & Company are similar to consumption sector
stocks like Marico, Dabur, Titan Industries, Asian Paints and Jubilant
Foods. The performance of these (consumption) companies is also driven
by brand preferences, rising disposable incomes, etc. The innerwear
segment stocks are trading at a multiple of 22-25x one year forward
earnings. We believe this sector deserves to trade at such multiples
considering the superior return ratios, healthy free cash flow generation,
consistent growth and healthy dividend payout. Our comparison with
stocks in the consumption space reveals that the stocks in the Indian
innerwear space are still trading substantially lower than the average P/E
of 29.6x (FY13E EPS) for all consumption stocks taken together.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_IndianInnerwearSector_InitiatingCoverage.pdf
A l o n g t h e c o n s u m p t i o n b a n d w a g o n !
The Indian apparel sector is expected to grow from | 1,709 billion in 2010
to | 4,700 billion by 2020E, representing a CAGR of 10.6%. Of this, the
innerwear market currently valued at ~ | 14,300 crore (in 2011) is
expected to grow to | 43,700 crore by 2020E, growing at a CAGR of
13.2%, outpacing the growth of the overall apparel market. Also, the
women’s segment that has historically been smaller in size compared to
the men’s segment is expected to grow at a faster pace (CAGR of 15%
over 2010-2020E as compared to 10% CAGR in the men’s segment). The
women’s innerwear segment is likely to touch | 30,000 crore from the
current | 8,500 crore. On the other hand, the men’s innerwear segment is
likely to grow from | 5,800 crore in 2010 to | 13,700 crore in 2020E.
Improving Indian demographics and increased preference for proper fits,
sizes, etc. lend credence to the growth of organised players in the Indian
innerwear market. Organised players (including Page Industries, Lovable
Lingerie and Rupa & Company, among listed players) are well poised to
capture this growth. We are initiating coverage on the Indian innerwear
space with a BUY rating on Page Industries. Based on the current
valuations, we believe that the upside potential in Lovable Lingerie is
limited and, hence, have a HOLD rating on the same.
Shift from unorganised to organised segment to aid overall growth
The Indian apparel market has been witnessing a shift towards the
organised segment. The share of the organised segment in the overall pie
has increased from 13% in 2005 to 16% in 2010 and the same is expected
to go up to 40% in 2020E. The organised apparel market is expected to
grow at a CAGR of 21.3% during 2010-2020E (faster than the overall
apparel industry, which is slated to grow at 10.6%). This augurs well for
organised players.
Higher share of premium products to aid margin expansion
The premium and super-premium category in both the men’s and
women’s segment has witnessed a higher growth than other segments.
With increasing disposable incomes and customers’ willingness to shell
out more for better quality products, domestic innerwear manufacturers
are working towards increasing the share of premium products in their
product portfolio. On the back of this, we expect a margin expansion in
the range of 50–250 bps (across our innerwear coverage universe) by
FY14E.
Sector multiple lower than that of consumption stocks
We believe the stocks in the innerwear segment like Page Industries,
Lovable Lingerie and Rupa & Company are similar to consumption sector
stocks like Marico, Dabur, Titan Industries, Asian Paints and Jubilant
Foods. The performance of these (consumption) companies is also driven
by brand preferences, rising disposable incomes, etc. The innerwear
segment stocks are trading at a multiple of 22-25x one year forward
earnings. We believe this sector deserves to trade at such multiples
considering the superior return ratios, healthy free cash flow generation,
consistent growth and healthy dividend payout. Our comparison with
stocks in the consumption space reveals that the stocks in the Indian
innerwear space are still trading substantially lower than the average P/E
of 29.6x (FY13E EPS) for all consumption stocks taken together.
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