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Recommendations India

Page Industries 3QFY2014 performance highlights and results update

February 13, 2014, Thursday, 09:39 GMT | 04:39 EST | 14:09 IST | 16:39 SGT
Contributed by Angel Broking

Page Industries (Page) continues to report strong numbers. For 3QFY2014, the company's top-line grew by 39.9% yoy to Rs.303cr, 9.8% higher than our estimate of Rs.276cr. The operating margin expanded by 121bp yoy to 18.2%, majorly on account of lower other expenses as a percentage of net sales. However, it came 92bp lower than our estimate of 19.1% because of higher-than-expected raw material cost. On account of robust top-line growth and margin expansion on a yoy basis, the company reported a 36.3% yoy growth in profit to Rs.35cr, in-line with our expectation.
Strong segmental performance: The strong sales growth was driven by equal contribution from volume growth and price hike. Blended volume growth for the quarter was 18.6% yoy and average realization increased by 18.0% yoy to Rs.118/piece of garment. The leisure wear segment continued to witness strong growth at 75.2% yoy to Rs.101cr followed by the brassiere segment which grew by 70.5% yoy, though on a lower base, to Rs.22cr. The men’s innerwear segment posted a healthy growth of 25.2% on a yoy basis to Rs.146cr and the women’s innerwear segment grew by 11.9% on a yoy basis to Rs.31cr.
Presence in fast growing segment with strong brand recall to drive growth: The innerwear market in India is underpenetrated as compared to other Asian peers, which provides a huge opportunity to Page. With a market share of 21% in men’s segment and 12% in women’s segment, we expect Page to tap the opportunity. Page’s strong brand recall and pan-India distribution channel will aid it in capitalizing on the opportunity. Also, Page has aggressive expansion plans of manufacturing 196mn pieces pa by FY2017 and has ~210 new product launches in the pipeline which are to hit the market in the next 2-3 years.
Outlook and valuation: We expect Page to register a revenue and profit CAGR of 28.6% and 29.3% to Rs.1,428cr and Rs.188cr respectively over FY2013-15E. At the CMP, the stock is trading at a PE of 33.4x FY2015E earning. However, we reiterate our Neutral recommendation on the stock due to high valuation and recent run up in stock price.