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Showing posts with label Page Industries. Show all posts
Showing posts with label Page Industries. Show all posts
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Page Industries
Investors with a medium-term perspective can buy the stock of textile-and-retail player, Page Industries, trading at Rs 850, at 24 times its trailing 12-month per-share earnings. The stock lacks direct comparables, whether in the textile or retail space. Still, closest comparable Maxwell Industries trades at a discount to Page.
We had given a ‘buy' call on the stock at Rs 710 in early December 2009, when the stock was trading at 22.6 times the trailing 12-month per share earnings. The company has since clocked a 40 per cent growth in sales (for the second half of 2009-10), while profits grew 30 per cent.
Our recommendation is also supported by Page's sustained financial performance, good brand presence in a niche market, multiple product lines, vast geographical reach and good dividend payouts. Investors with moderate return expectations can buy this stock.
Product lines
Innerwear for men and women is the primary product line. To mitigate risks of product concentration, Page branched out into leisure wear and thermals for men and women. Both innerwear and leisure are collectively sold under the Jockey brand.
The product range is in a mid-to-premium band, providing it with the ability to make the most of the vast market of both the value-conscious and the lifestyle consumers. Product depth in innerwear is also quite strong, and it is the innerwear segment that accounts for majority of revenues.
The apparel market is dominated by menswear, though women's wear is a fast-growing segment. Menswear currently makes up more than half of revenues for Page. However, with established product lines in both categories, the company is well-placed to make the most of the dominant and growth segments.
Page has the licence to market the Jockey brand in Bangladesh, Sri Lanka and Nepal. However, revenues from exports are still negligible and are unlikely to be a revenue driver even in the coming quarters.
Page has production capacities for garment and elastic manufactures, which allow cost-controls leading to better operating margins. Manufacturing capacities have increased significantly, post the infusion of funds raised from its initial public offer in 2007.
Brand and retail reach
A key factor supporting Page is the strong brand recall that Jockey commands, especially in the mid-priced everyday innerwear segment, and compared with other international brands.
The company also benefits from the technological and design support of Jockey International. Additionally, Page benefits from the non-discretionary nature of its primary product offering and its presence in the value-for-money segment. However, the company aims to scale up leisure wear as a lifestyle brand, besides pushing sales in its premium category, both of which may be a tad difficult to achieve given its mid-priced foothold.
Another factor buoying sales is the extensive reach of Page's products. Page retails through its own exclusive branded stores, a whole host of multi-brand outlets such as Shoppers' Stop and Lifestyle, and finally through regular hosiery stores. Its retail network thus spans over 17,000 outlets in more than a thousand cities, up from the 14,000 two years ago.
Such a vast reach indicates its ability to address a wide customer space and mitigate risks of area concentration. Even with its exclusive outlets, stores are quite evenly distributed in the north, west and southern zones.
Current-owned store count stands at 55, up from the 43 at the end of FY-09. Plans are on reach a store count of 100 by the end of FY-11. With debt-equity on the lower side at 0.5 times, bankrolling such expansion may not be hard to come by.
Financial performance
Over a three-year period, sales clocked a 36 per cent compounded annual growth while net profits grew at 33 per cent. Sales in FY-10 grew 33 per cent over the figure in FY-09, while net profits posted a 26 per cent growth.
Operating margins stood at 21 per cent for FY-10. Margins are a shade lower than the 22 per cent of FY-09, on the backs of higher raw material costs. With cotton prices on an upswing, margins are likely to come under further pressure. Even so, margins are substantially higher than most retailers.
Depreciation costs have also been on the rise, as a result of significant capacity expansion, more than doubling from FY-07. However, depreciation as a percentage of sales has remained more or less constant at 2-2.5 per cent, implying that capacity addition has at least contributed to sales. Net margins have hovered around 12 per cent over the past three years. Given its low debt, interest costs do not drag earnings and margins; interest cover is healthy, having been maintained at over 10 times for the past three years.
via BL
Sunday, December 06, 2009
Page Industries
Page Industries, a textile player, has sailed through the storms faced by the textile industry rather well, posting healthy quarterly and annual growth in sales and profits. Page operates in a niche segment, its products hold brand recall and it has a wide-reaching and diversified presence, aiding sales growth. Low debt, strong and sustained margins, and good dividend payouts are positives. At Rs 715, the stock trades at about 22.6 times trailing twelve month per-share earnings. Although it lacks directly comparable peers, the stock is at a premium. Investors with moderate return expectations may accumulate the stock on price dips.
Branded play
Page is the exclusive Indian licensee of the US-based leisure and innerwear brand Jockey. The brand has strong recall for men and women; together with a mid-to-premium pricing range, it bodes well for the company. Page has a market share of about 20 per cent of the mid- and premium segment and the technological and design support of its overseas parent.
Page has also secured the licence to manufacture and market the Jockey line in Sri Lanka, Bangladesh, Nepal and West Asia. Exports, however, hardly account for revenue share, and are not likely to contribute in the next few quarters. The company has an integrated manufacturing capacity, producing yarn, outsourcing fabric production, and converting fabric to garments in its facilities. It has expanded capacity steadily to meet growing sales with garment facilities expanding from 56 million pieces to 74 million in FY09. Further step-up in production and increase in finished goods warehouse space will be undertaken this financial year.
Product play
Page produces and markets its products across several price points, ensuring a higher share of purchases besides mitigating risks of product concentration. Product lines span a wide range of innerwear, leisure wear, sportswear and thermal wear for men and women.
Page has a firm footing in the mid-priced value-for-money segment, as well as a presence in the premium range, thereby marking a presence across price points. Women's innerwear accounts for about 15 per cent of revenues, with 17 per cent stemming from leisure wear. Menswear dominates revenues with the balance.
Products are sold through multi-brand outlets such as Lifestyle, Central and Shoppers' Stop and smaller hosiery stores besides about 50 exclusive outlets. In stores such as Shoppers' Stop and Reliance, the brand has about 50 per cent of the market share.
The company has a far-reaching sales network, scaling up to its current presence in about 16,000 outlets from the 14,000 two years ago. Its exclusive store count has reached 50, with an addition of 13 stores in FY09 and seven stores in the first half of FY10.
The company aims at reaching a store count of 100 by the end of FY11. A low debt-equity of 0.48 times augurs well for the company's ability to fund such growth.
Competition stems from other mid and premium brands such as VIP, Enamor, Rupa, Chromosome and so on; with foreign brands as well finding the Indian market attractive, Page may have to cede market share.
Strong and steady
Given the need-based and non-discretionary nature of its product line, Page has managed healthy 30 per cent growth in the past slowdown-hit year.
Over a three-year period, Page clocked a compounded annual growth rate of 35 per cent while net profits staged a 40 per cent growth. Page also has healthy margins; operating margins for FY 09 stand at 22.4 per cent, up two percentage points from the year before.
With low debt, it is not interest costs but depreciation that left net margins at 12.2 per cent for FY09. Even so, margins are quite healthy, and have hovered around 12 per cent for the past three years.
The first half of this year saw sales jump 28 per cent, though higher employee and other expenses caused a slight fall in operating margins to 21.9 per cent. Net margins, on the other hand, showed a slight improvement to 12.4 per cent.
The company has paid out dividends of at least 100 per cent every year since its IPO, declaring three interim dividends besides a final dividend in FY09.
via BL
Tuesday, February 27, 2007
Sunday, February 25, 2007
Page Industries: Avoid
Page Industries, a licensed manufacturer of the popular `Jockey' brand of innerwear in the country, is entering the market with a public issue of equity shares. On offer is a fresh issue of capital by the company along with an offer of sale from the promoters. The company plans to raise between Rs 50 crore and Rs 55 crore depending on the eventual price fixed which would be used, among other purposes, for brand-building and for setting up additional manufacturing facility.
The company's sales have been growing at an annual rate of roughly 28 per cent in the last four years. The net profits have seen an even better rate of annual growth of nearly 60 per cent. There is, thus, little doubt that the company's brand of innerwear has gained market acceptance as evident in the growth of its sales and net profits. On the face of it, therefore, the company's claim to pricing its shares at an earnings multiple of between 22.5 and 25 (depending on the price within the band indicated by the company) based on the annualised profits of first half of fiscal 2006-07, appears reasonable.
A general rule of thumb in investment valuation is that an equity is considered an attractive candidate if the ratio of its P/E multiple to the annual growth rate in profits is below one. In the instant case, it is in the region of 0.5. On a comparison to its closest competitor, Maxwell Industries, manufacturer of the VIP range of innerwear whose current share price values its latest earnings by a multiple of around 22 too, the company's indicative price band for its share does not appear unreasonable.
Competitive parameters
But despite such attractive parameters of valuation, we are of the view that investors are better off avoiding the public offer for the following reasons. One, the market for innerwear is a highly fragmented one with a number of regional players in the branded segment, besides innumerable small players in the unbranded category.
While Page Industries' positioning as a premium product would limit the scope of competition, it must be admitted that the market is characterised by the existence of competing offerings at various price points and there is always the risk of `down trading' — customers settling for an offering at a lower price point — and this must exert some pressure on margins.
There are limits to premium pricing strategies to shore up profit margins, considering that innerwear by its very nature cannot command super luxury positioning that allows consumer to make a life-style statement.Two, the market is also seeing the entry of large apparel manufacturers with established brand equity entering the innerwear market. They are likely to pose a stiff competition to Page Industries, which has no presence in the traditional apparel market. It has a limited presence in the leisure wear segment.
Success at a price
Three, the entry of a number of players in the organised retail trade is likely to be marked by the advent of store brands both in the mass and premium segments across all consumer product categories. Innerwear cannot be an exception to this phenomenon. Even if the likes of Page Industries manage to hold their own amidst the clutter, the success will come at a price.
Historically, pricing power has tended to shift to the players in the organised retail trade with a chain of stores, given the volumes that they can muster. The company is trying to counter this with its own exclusive retail outlets besides a sharp hike in advertising outlays. The success of such a strategy is, however, fraught with uncertainty.
Offer details
The offer, lead managed by IL&FS Investsmart, opens on February 23 and closes on February 27. The net offer to the public is 27.89 lakh shares.
Thursday, February 22, 2007
Page Industries IPO Analysis
Good business but tight price
Page Industries (PIL) commenced operations in Bangalore in 1995 with the key objective of bringing the innerwear brand, Jockey to India. Over the last 11 years, the company has grown from three factories to eight, and from 249 employees to over 3,200 employees. From 800 stores in 1996, its products are now sold in over 14,000 outlets in over 1,100 cities and towns spanning across the country.
The promoters (Genomals) had been associated with Jockey International Inc as their sole licensee in Philippines. Jockey International later proposed that PIL take up the India licence and set up operations in the country to cater India, Bangladesh, Nepal and Sri Lanka.
At time when there was no quality international innerwear brand retailing in India, PIL introduced a wide range of quality products for men, women and children as well innovative marketing concepts such as display modules aimed at enhancing the consumer’s involvement with purchase.
Presently, PIL has a capacity of around 33 million pieces per annum. The company generates 70% of its revenue from men’s wear, 15% from women’s wear, and 15% from leisurewear. It currently focuses on the premium segment and plans to enter the super-premium segment in each of these categories.
PIL plans to raise around Rs 100.94 crore - Rs 110.75 crore (depending on the price band). Of this, Rs 50-55 crore will be through offer of sale by the promoters. The balance will be used to fund brand building, expansion and modernisation. The company will spend around Rs 23.35 crore over the next three years on brand building that will include TV advertising, advertising in lifestyle supplements, and opening of exclusive stores. It will also spend Rs 30.10 crore to expand its existing manufacturing facilities of garments, socks, accessories like elastics, setting up new facilities for manufacturing of products at Bommasandra, Bangalore; modernise production process; implement new generation ERP software (SAP),and purchase corporate head office in a central location in Bangalore. The balance will be spent to meet general corporate purposes and expenses of this offer.
Post-expansion, PIL’s capacity will increase to 47 million pieces per annum in FY 2008 and 74 million pieces in FY 2009.
Strengths
* ‘Jockey’ is a well-established brand in the market.
* PIL has a good and growing retail presence. Brisk expansion of organised retail is positive for the branded innerwear segment.
Weakness
* PIL could face severe competition from the existing apparel brands that have now launched innerwear as their brand extension. Moreover, many foreign brands are lined up to enter the Indian market. Overall, the innerwear market will remain highly competitive and the competition in the premium segment will also grow.
* The company is the licencee of the Jockey brand and does not own the brand. It pays royalty to Jockey International, i.e., around 5% of its net sales.
Valuation
The annualised EPS for the six months ended September 2006 stood at Rs 16 resulting in a price to earning (PE) multiple of 22.5 to 24.7 times at the lower and upper band of Rs 360 to Rs 395. While the textile sector is attracting low PEs, the comparable listed company Maxwell Industries (which owns the more popular VIP and Lovable brand) trades at a TTM P/E of around 26 times. Notably, Maxwell is undergoing restructuring through merger of group companies/strategic tie-ups and the current price is factoring the benefits of that restructuring, which is not visible in its EPS currently. Moreover, Maxwell owns the its brands, while PIL is only a licencee of the Jockey brand.
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