Page Industries

08 Mar

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.”

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08 Sep

Remains financially strong and net debt free–Page Industries

Update on the Indian Equity Market:

On Monday, Nifty closed with0.35% gains at 11,374. Within NIFTY50, INFRATEL (+5.7%), HDFCLIFE (+3.2%), and DRREDDY (+2.3%) were the top gainers, while M&M (-3.6%), UPL (-2.8%), and BAJFINANCE (-2.5%) were the top losers. Among the sectoral indices, FMCG (+0.6%), IT (+0.6%), and MEDIA (+0.3%) gained the most. REALTY (-0.9%), AUTO (-0.5%), and PVT BANK (-0.3%) ended with losses.

Remains financially strong and net debt free–Page Industries

Excerpts of an interview with Mr. Chandrasekar, CFO, Page Industries, aired on ETNow dated 7th September 2020:
• Page Industries has seen significant improvement in demand. From 0 sales in April, -80% YoY in May, -40% YoY in June, -30% YoY in July to a YoY growth in August, there is a good month-on-month uptick. Outlook remains optimistic for rest of the year.
• The buildup in demand has been gradual so Mr. Chandrasekar doesn’t think it was just pent up demand. Secondary sales are more than factory sales. All indications suggest that things are getting back to normalcy.
• August sales are a pretty good indication that demand is back. But predicting full year growth rate is still difficult.
• Sales via e-commerce inJuly and August were better than the past trend. E-commerce has seen YoY growth of about 200%. Purchasing modes have changed across sectors. In terms of margins and investments for Page, e-commerceis more or less similar to other distribution channels.
• Procurement control works between a range of +/-1% so raw material cost has remained more or less the same. Page is trying to work on procurement optimization, but in the near future,raw material cost will be rangebound.
• Page has done significant optimization on the other operating expense including wages, factory overheads, selling overheads, advertising,and corporate overheads. They have managed significant reductions over 4QFY20 as well as 1QFY20.
• Page’s cash position of Rs 1,700 mn as of 1QFY21 is better than any time during the past year. They have done a lot of work across working capital. Page has not borrowed any funds and continues to remain net debt free.
• Page is also paying vendors earlier than they are asking. MSMEs need support to remain afloat at this point. It is also in the interest of Page to help the small businesses as they are trusted vendor partners. Despite that, Page has improved its cash position.
• Page hasretained all employees during this difficult time.
• A specific European fund has raised concerns that Page Industries is not following best manufacturing practices. Mr. Chandrasekar assured that Page’s manufacturing practices are based on fundamental and ethical policies. Page has published sustainability report for the past 2 years in the public domain which can be referred to address concerns. Page has been in the business long enough to know that it’s a people intensive business and the company hasto take care of its employees.
• Men Innerwear market is growing at about 11% YoY and is expected to grow to Rs 900 bn by 2028 from 350 bn currently. Women innerwear market is expected to grow at about 12.5% YoY to Rs 680 bn by 2028 from Rs 210 bn currently. Page is very small in the overall market size. Premiumization will continue to happen in the market so maintaining market share is not an issue. The issue is about increasing geographical reach and introducing new offerings in the women and kids segments.
• Page will resume capex and other business investments once the business gets back to normal levels from the covid-19 disruption.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of PAGEIND was ₹ 18,296/- as of 7-September-2020. It traded at 91.5x/ 47.0x/ 38.7x the consensus EPS estimate of ₹ 200/ 389/ 473 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 17,617/- implies a PE multiple of 37.2x on FY23E EPS of ₹ 473/-.

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.”

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