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Consistent performance calls for upgrade!
• Page Industries’ (Page) Q1FY15 revenues were marginally lower than
our estimate. A superior operational performance led to in-line PAT
• Revenues increased 24.4% YoY to | 378.3 crore (I-direct estimate:
| 393.3 crore) led by 9.0% volume growth (30.5 million pieces) and
14.2% realisation growth (| 124/piece). Strong growth in the
brassiere and leisure segment aided this performance
• Owing to lower-than-expected selling and advertising expenses and
also relatively lower raw material costs, the operating margin at
20.0% (up 100 bps YoY) was higher than our estimate of 17.9%
• Consequently, PAT at | 54.3 crore (up 26.0% YoY) was in line with
our estimate of | 53.8 crore
Healthy volume growth continues
During FY10-14, volumes have grown at a CAGR of 19.8%. Page has
achieved this on the back of aggressive capacity addition, which has
increased from 2.2 crore pieces in FY07 to 16.3 crore pieces in FY14. We
expect the company to continue the volume growth trajectory at a CAGR
of ~16% led by capacity addition. We expect the total capacity to touch
28 crore pieces by FY17E. We believe that with the launch of newer SKUs,
volume growth should not be a concern for Page.
Rising costs to be passed on
Page is cushioned from rising input costs as it takes price hikes to the
tune of 5-10% per annum, which enables it to maintain operating
margins. The company is confident of maintaining its operating margin
around 20%. Though the operating margin has increased to 21.4% in
FY14 (owing to removal of excise duty), we expect it to stabilise at 21.0%
by FY17E.
Favourable demographics, low penetration to boost growth
The Indian innerwear segment valued at $4 billion is expected to grow at
12% CAGR over the next decade. Page has consistently grown well
above the industry average. We expect the same to continue as India’s
per capita spend on innerwear is ~90% lower than that of Thailand and
China. The market has been growing faster than the overall clothing
market, driven by premiumisation. With discretionary consumer spend in
India continuing to grow, these trends should persist, aided by rising
urbanisation and growth in consumer incomes.
Marginal increase in estimates owing to better operational performance
We have upgraded our FY15E, FY16E operating margin estimates by 38
bps, 48 bps, respectively, led by a better-than-expected operational
performance in Q1FY15. While no price hikes have been taken in Q1FY15,
the company is likely to take price hikes in H2FY15E. This should also aid
in cushioning margins. Consequently, our earnings estimates for FY15E,
FY16E have been revised upwards by 0.7, 1.4%, respectively. We
introduce our FY17E EPS of | 288.7.
Consistent growth with healthy fundamentals; upgrade to BUY
Many consumer oriented companies that have delivered consistent
growth are trading at premium multiples. Similarly, we believe Page
should also command a premium considering its strong fundamentals
and consistent dividend payouts. Page has been able to grow consistently
while many of its peers are struggling to grow. We, thereby, upgrade
Page Industries to BUY with a revised target price of | 8660 (based on 30x
FY17E EPS of | 288.7).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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Consistent performance calls for upgrade!
• Page Industries’ (Page) Q1FY15 revenues were marginally lower than
our estimate. A superior operational performance led to in-line PAT
• Revenues increased 24.4% YoY to | 378.3 crore (I-direct estimate:
| 393.3 crore) led by 9.0% volume growth (30.5 million pieces) and
14.2% realisation growth (| 124/piece). Strong growth in the
brassiere and leisure segment aided this performance
• Owing to lower-than-expected selling and advertising expenses and
also relatively lower raw material costs, the operating margin at
20.0% (up 100 bps YoY) was higher than our estimate of 17.9%
• Consequently, PAT at | 54.3 crore (up 26.0% YoY) was in line with
our estimate of | 53.8 crore
Healthy volume growth continues
During FY10-14, volumes have grown at a CAGR of 19.8%. Page has
achieved this on the back of aggressive capacity addition, which has
increased from 2.2 crore pieces in FY07 to 16.3 crore pieces in FY14. We
expect the company to continue the volume growth trajectory at a CAGR
of ~16% led by capacity addition. We expect the total capacity to touch
28 crore pieces by FY17E. We believe that with the launch of newer SKUs,
volume growth should not be a concern for Page.
Rising costs to be passed on
Page is cushioned from rising input costs as it takes price hikes to the
tune of 5-10% per annum, which enables it to maintain operating
margins. The company is confident of maintaining its operating margin
around 20%. Though the operating margin has increased to 21.4% in
FY14 (owing to removal of excise duty), we expect it to stabilise at 21.0%
by FY17E.
Favourable demographics, low penetration to boost growth
The Indian innerwear segment valued at $4 billion is expected to grow at
12% CAGR over the next decade. Page has consistently grown well
above the industry average. We expect the same to continue as India’s
per capita spend on innerwear is ~90% lower than that of Thailand and
China. The market has been growing faster than the overall clothing
market, driven by premiumisation. With discretionary consumer spend in
India continuing to grow, these trends should persist, aided by rising
urbanisation and growth in consumer incomes.
Marginal increase in estimates owing to better operational performance
We have upgraded our FY15E, FY16E operating margin estimates by 38
bps, 48 bps, respectively, led by a better-than-expected operational
performance in Q1FY15. While no price hikes have been taken in Q1FY15,
the company is likely to take price hikes in H2FY15E. This should also aid
in cushioning margins. Consequently, our earnings estimates for FY15E,
FY16E have been revised upwards by 0.7, 1.4%, respectively. We
introduce our FY17E EPS of | 288.7.
Consistent growth with healthy fundamentals; upgrade to BUY
Many consumer oriented companies that have delivered consistent
growth are trading at premium multiples. Similarly, we believe Page
should also command a premium considering its strong fundamentals
and consistent dividend payouts. Page has been able to grow consistently
while many of its peers are struggling to grow. We, thereby, upgrade
Page Industries to BUY with a revised target price of | 8660 (based on 30x
FY17E EPS of | 288.7).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
PDF link: http://content.icicidirect.com/mailimages/IDirect_PageInds_Q1FY15.pdf
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