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 14^th 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.