Tag - apparels

Will comfortably sail through the near-term headwinds – Page Industries

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/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Planning for double-digit revenue growth in FY21E: Page Industries

Update on the Indian Equity Market:

Following its Asian peers, the markets continued the downward trajectory on Tuesday with Nifty closing 53 points lower at 11,993. With the majority of result season wrapped up by last Saturday, the focus has been shifted to the global macros. Within the sectoral indices, only two indices, Media (1.9%) and IT (0.6%) ended the day higher while METAL (-1.2%), AUTO (-1.0%) and REALTY (-0.9%) were the highest losers. Among the index stocks, COALINDIA (2.9%), ZEEL (2.7%) and BPCL (2.3%) were the gainers whereas INFRATEL (-11.3%), YESBANK (-6.3%) and TATAMOTORS (-3.9%) brought the index lower.

Excerpts from an interview with Mr. Chandrasekhar K., CFO – Page Industries published in ET NOW on 14th February 2020:

  • Commenting on the 3QFY20 result, Mr Chandrasekhar said that there is a temporary dip in PAT because of investments that company has made in sales, marketing, people and technology. This is the only way for company to drive sustainable growth in the future.
  • The growth in revenues for 3QFY20 as well as for 9MFY20 was at 7%. This was lower than what the company had expected. He said that if the company had volume growth in mid-teens, all of the above stated expenses would have been fully absorbed and the company would have maintained the margins. Whenever the demand returns, the margins will be back to the historical levels.
  • He said that the company operates in an under-penetrated premium apparel market and there are multiple opportunities for growth. The company is expanding its presence and distribution in exclusive business outlets and continue to invest in technology.
  • The street is expecting the industry to grow at 10% in FY21E. The company is also expected to achieve double-digit growth. He said that FY21E should be better than FY20.
  • Instead of looking at market share, the company focuses on the penetration levels in the industry. The company has a penetration of 20% into the premium men’s innerwear market. The company has penetration levels of 6-8% in women’s market as well as in athleisure which is an activewear segment.
  • The company enjoys a strong consumer base. It has a reach of more than 63,000 retail outlets and the company is able to withstand the slow phase. The company currently operates through 720 Exclusive Business Outlets (EBO) and has a target of reaching more than 1,000 EBOs by FY21E.
  • The company has aggressively ramped up the kids’ clothing portfolio. The acceptance has been pretty good in the market. The segment has grown almost 45% this year and the company has created a separate channel for kids. The company is also planning to open exclusive Jockey junior EBOs in the coming quarter.

Consensus Estimate: (Source: market screener website)

  • The closing price of Page Industries was ₹ 22,689/- as of 18-February-2020.  It traded at 63x/ 51x/ 44x the consensus earnings estimate of ₹ 362/ 445/ 520 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Page Industries is not available on market screener website.