Page Industries :: Karvy research

Leading Brand with Strong Recall Value
Page Industries’ (Page) strong market presence with the global brand ‘Jockey’
in its arsenal makes the Company the market leader in branded innerwear
segment in India. We expect domestic innerwear market worth Rs. 140 bn to
grow at 12%‐15% over a couple of years. Page – with its extensive
distribution channel coupled with fully integrated in‐house manufacturing
facilities and accredited quality controls – is expected to benefit the rising
demand ride. ‘Jockey’ is the only innerwear brand in India to be awarded the
‘Superbrand’ status and is certified by the US‐based World Wide Responsible
Apparel Production (WRAP).

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Well‐positioned in High Growth Segments: Page caters to middle and
premium segments of the men’s and women’s category with an approximate
market share of 21% and 12%, respectively. The premium innerwear market
is likely to grow at 28%‐30% with a base of Rs. 37 bn, and we expect Page to
lead the growth due to brand recognition, product innovation, and reach
across over 1,200 cities, over 400 distributors and 23,000+ retail outlets.
Slower volume growth & Stable realizations cautions near‐term: Pages’
Top & Bottom‐line grew at a 5‐year CAGR of 38%‐39%. With ~20% price hike
across products early FY12, management is looking at stable realizations and
similar volume growth for FY13 as witnessed in FY12 i.e. 19%. Further, we
believe this left with limited room for margin expansion. We expect volume
growth to be a major contributor during FY13E.
Consistent Dividend Payment with High Pay‐out Ratio: Page has been
paying dividends with a consistent pay‐out ratio of as high as 50%. It is likely
to continue high dividend payments despite being in capacity expansion
mode and is into working capital extensive industry, which makes us believe
on the strong growth prospects going forward.
Outlook & Valuations
The revenues and net income of Page Industries grew 38% and 39% CAGR,
respectively over FY07‐12. Going forward we believe topline & earnings
growth to be moderate with a CAGR of 23% & 27% over FY12‐FY14E amid
stable realizations. At CMP of Rs. 3,485 per share, the stock is trading at 26.9x
FY14E earnings, which we believe has limited upside considering slower
near‐term growth. We initiate coverage on the Company with “HOLD”
recommendation with a target price of Rs. 3,628 per share having a potential
upside of 4%.