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Page Industries 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Page Industries (Page) reported a mixed set of numbers. The company's top-line grew by 25.6% yoy to Rs.216cr, from Rs.172cr in the same quarter last year, marginally above our estimate of Rs.207cr for the quarter. On the other hand, the EBITDA margin for the quarter contracted marginally by 17bp yoy and came in at 17.0%, against our estimate of 20.8%. Consequently, the company reported a profit of Rs.25cr, 27.6% higher yoy from Rs.20cr in 3QFY2012, but 17% lower than our estimate of Rs.31cr.

Huge market size, strong brand image and wide distribution channel to drive growth: According to industry reports, the Indian innerwear industry stood at Rs.14,000cr (in FY2011) and is expected to grow at a CAGR of 13.2% to Rs.43,700 by FY2020. The innerwear market in India is underpenetrated with per capita spend significantly lower than other Asian peers which provides huge opportunity to the company. With the agreement of exclusivity for 18 years of JOCKEY® and a market share of 21% in men’s segment and 12% in women’s segment (in the organized innerwear market), we expect Page to tap the opportunity and report a revenue CAGR of 23.7% to Rs.1,046cr in FY2014. Page’s strong brands and pan-India distribution channel will aid it in capitalizing on the opportunity. In addition, the expansion plan of manufacturing 196mn pieces per annum by FY2017E (~150mn pieces by December 2013) from the current capacity of 128mn pieces, with a capex of ~Rs.30cr per year, is on way.

Outlook and valuation: We expect Page to register a revenue CAGR of 23.7% to Rs.1,046cr over FY2012-14. Given the cost pressure, we expect margin to be flat by FY2014 at 19.6%. Consequently the profit is expected to grow at a CAGR of 25.5% to Rs.142cr. At the current market price, the stock is trading at a PE of 25.4x FY2014E earnings. We maintain our Accumulate recommendation on the stock with a target price of Rs.3,438 based on a target PE of 27.0x for FY2014E.