Will comfortably sail through the near-term headwinds – Page IndustriesPranav Mahajan
Update on the Indian Equity Market:
On Tuesday, NIFTY50 ended at 16,013 (+0.95%) as it closed near the day’s high. Among the sectoral indices, REALTY (+3.3%), MEDIA (+2.8%), and IT (+2.7%) were the top gainers, whereas METAL (-1.5%), and OIL&GAS (-0.7%) were the only losers. Among the stocks, IOC (+4.2%), SUNPHARMA (+4%), and TATACONSUM (+3.8%) were the gainers while HINDALCO (-4.6%), ONGC (-4.4%), and TATASTEEL (-2%) were the losers.
Excerpts of an interview with Mr. Chandrasekar K, CFO, Page Industries (PAGEIND) with Bloomberg Quint on 7th March 2022:
- In 3QFY22, Page Industries clocked in 28% growth YoY in revenue and a 25% growth in volumes.
- The company is experiencing uniform growth across metros as well as tier 2,3 & 4 cities.
- The company’s current performance is way ahead of pre pandemic numbers in all aspects as 4 of the best quarters in the company’s history have come from the last 5 quarters.
- An overall strong performance in calendar year 2021 was largely driven by growth in athleisure wear. The usage of athleisure wear has grown over the years but the lockdown and work from home situation acted as a catalyst for a spurt in demand.
- In CY21, raw material prices have moved up by 20%. Page Industries has taken a price hike of 5% in Q1 and further hike of 8% recently. However, since the end of Q3, the raw material prices have weakened a bit, hence, no more price hikes have been planned. The company is targeting its full year EBITDA margins to be at its long run average level of 20%
- The company has added 40,000 multi brand outlets (MBOs) in the last 2 years and the total store count now stands at 1,10,000 stores. The sales per store in smaller towns is almost similar to the stores in larger cities. Along with that, the company’s digital transformation started around 3 years back and as a result of that, E-commerce sales are at 8-9% of total revenues.
- The company is looking for growth opportunities by increasing the penetration of premium apparel category which currently stands at 12% and athleisure wear which is in single digit. To capture these markets, the company has been actively hiring and investing in people is sales and in backend, even during the pandemic.
Asset Multiplier Comments
- As the raw materials prices have moved up, all the apparel manufacturers have been forced to take much more frequent price hikes. These price hikes can hurt the smaller players much more in terms of loss of revenue due to lower demand from price sensitive customers.
- Page Industries being a manufacturer of premium category products and having sufficient pricing power, may take price hikes if required and is likely to have no pressure on the margins, without any material impact on the top line.
Consensus Estimate: (Source: TIKR and Investing.com websites)
- The closing price of Page Industries was ₹ 39,406/- as of 08-March-2022. It traded at 89x/66x/56x the consensus earnings estimate of ₹ 445/593/705 for FY22E/FY23E/FY24E respectively.
- The consensus target price of ₹ 40,805/- implies a P/E multiple of 58x on FY24E EPS estimate of ₹ 705/-
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