Karvy Page Industries

Textile & Apparel June 04, 2013

Page Industries

Bloomberg: PAG INReuters: PAGE.BO BUY

Institutional Equities

India Research

QUARTERLY REVIEW

Recommendation

CMP: Rs4,218

Target Price: Rs5,097

Previous Target Price Rs3,861

Upside (%) 21%

Stock Information Market Cap. (Rs bn / US$ mn) 47/829

52‐week High/Low (Rs) 4,440/2,680

3m ADV (Rs mn /US$ mn) 21/0.4

Beta 0.5

Sensex/ Nifty 19,610/5,939

Share outstanding (mn) 11

Stock Performance (%) 1M 3M 12M YTD

Absolute 11.3 26.3 38.9 23.2

Rel. to Sensex 11.2 21.8 13.1 22.0

Performance

Source: Bloomberg

Earning Revision

(%) FY14E FY15E

Revenue 2.9 4.6

EBITDA 4.2 7.2

EPS 3.3 5.6

Source: Karvy Institutional Research

Analysts Contact Rahul Singh

+91‐40‐44857911

[email protected]

1,7002,2002,7003,2003,7004,2004,700

15,500

17,500

19,500

21,500

Jun‐12

Jul‐12

Aug‐12

Oct‐12

Nov‐12

Dec‐12

Jan‐13

Mar‐13

Apr‐13

May‐13

Sensex (LHS) Page Industries

High on quality; high on growth ‐ Upgrade to BUY Page Industries (PI) high earnings growth is supported by leisure wear

segments FY13‐15E EPS CAGR of 29.3%. With ~200bps better profitability

over other products the segment would add incrementally to already

superior ROE & ROCE vs mid‐tier consumer discretionary. We upgrade

our recommendation to “BUY” and revise our target price to Rs. 5,097,

valuing at 30x FY15E earnings with PEG of 1x.

Result outshines expectations: Page Industries’ sales grew 35.5% YoY to Rs.

2,091 mn (our expectations Rs. 1,902 mn) during Q4FY13. Whilst volume

growth for the quarter was 15%, realization growth of approx. 15% at Rs.108.

EBITDA grew 32.5% YoY to Rs. 367 mn (our expectations Rs. 287mn) during

Q4FY13 on higher realizations. EBITDA margin for the quarter expanded

189bps to 17.6%. Net income for Q4FY13 grew 38.4% YoY to Rs. 236 mn (our

expectations Rs. 193 mn) with Net margin improvement of 24 bps YoY.

Strong Balance sheet: PI has a strong balance sheet with low gearing ratio of

0.5x, low working capital requirement provides comfort on consistent high

dividend payout of ~50%. Strong demand traction, superior return ratios &

free cash flows generation position PI as a quality investment amongst peers.

Well Positioned in High Growth Segments: PI caters to premium & semi‐

premium innerwears with an approx. market share of over 21% & 12% in

men & women category respectively. These segments of the market are

expected to grow at ~25‐30% over FY13‐15E. We expect PI to lead this growth

with its strong brand recognition, innovative product placement and wide

distribution reach of over 23,000 retail outlets & 100 EBOs.

Outlook & Valuation: Over past 3M PI has outperformed BSE500 by 24% on

back of expectations of above average FY13‐FY15E EPS CAGR of 30%,

superior RoE & RoCE, strong balance sheet and robust segmental demand. In

this high growth phase we expect PI to trade at premium valuation multiple

in line with other consumer discretionary and capture this on PEG of 1x. At

CMP of Rs. 4,218, the stock trades at 24.8x FY15E EPS. We upgrade our

recommendation to “BUY” with revised target price of Rs. 5,097 per share

valuing PI at 30x FY15E EPS (PEG of 1x), with an upside potential of 21%.

Key Financials Y/E Mar (Rs. mn) FY2011 FY2012 FY2013 FY2014E FY2015E

Net Sales 4,916 6,834 8,635 10,813 13,704

EBITDA 904 1,330 1,642 2,136 2,775

EBITDA margin (%) 18.4 19.5 19.0 19.8 20.3

PAT (Rs) 585 900 1,125 1,449 1,895

EPS (Rs) 52.5 80.7 100.9 129.9 169.9

YoY growth (%) 47.8 53.7 25.1 28.7 30.8

RoE (%) 52.6 62.1 59.3 59.4 59.8

RoCE (%) 27.0 32.7 34.6 35.3 37.5

P/E (x) 80.4 52.3 41.8 32.5 24.8

P/Sales (x) 9.6 6.9 5.4 4.4 3.4

EV/EBITDA (x) 53.3 36.0 29.3 22.6 17.5

Source: Company, Karvy Institutional Research

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June 04, 2013

Page Industries

Result outshines expectations Page Industries’ sales grew 35.5% YoY to Rs. 2,091 mn (our expectations Rs. 1,902

mn) during Q4FY13. Whilst volume growth for the quarter was 15%, realization

growth of approx. 15% at Rs.108. EBITDA grew 32.5% YoY to Rs. 367 mn (our

expectations Rs. 287mn) during Q4FY13 on higher realizations. EBITDA margin

for the quarter expanded 189bps to 17.6%. Net income for Q4FY13 grew 38.4% YoY

to Rs. 236 mn (our expectations Rs. 193 mn) with net margin improvement of 24

bps YoY.

For FY13, sales, EBITDA & net income grew 26.3%, 23.4% & 25.1% to Rs. 8,635mn,

1,642mn & Rs. 1,125mn respectively. Volume & realization grew at 17% & 8% to

87.3mn pcs (our expectations 88.6mn pcs) & Rs. 98.8 (our expectations Rs. 95.3) a

piece respectively.

Exhibit 1: Quarterly Performance

(Rs Mn) Q4FY12 Q3FY13 Q4FY13 QoQ (%) YoY (%)

Revenues 1,543 2,162 2,091 (3.3) 35.5

Operating Costs 1,301 1,794 1,723 (4.0) 32.5

EBIDTA 242 367 367 0.0 51.9

EBIDTA Margin (%) 15.7 17.0 17.6 58bps 189bps

Other Income 43 53 37 (31.2) (14.3)

Interest 16 17 30 78.4 89.0

Depreciation 27 29 31 8.1 14.3

Profit Before Tax 242 375 343 (8.5) 42.0

Tax 71 121 107 (11.3) 50.5

Tax Rate (%) 29.5 32.2 31.3

Rep. PAT 170 254 236 (7.2) 38.4


Exhibit 2: Revenue & Volume break up

Revenue (Rs. mn) Q4FY13 FY13 FY13 Share (%) Volume (Mn Pcs) Q4FY13 FY13 FY13 Share (%)

Men Innerwear 1,014 4,637 53.8% Men Innerwear 11.5 55.8 63.9%

Women Innerwear 276 1,122 13.0% Women Innerwear 3.2 14.1 16.1%

BRA 135 542 6.3% BRA 0.7 2.8 3.2%

Leisure Wear 561 2,162 25.1% Leisure Wear 3.6 14.3 16.4%

Speedo 92 160 1.9% Speedo 0.2 0.4 0.4%


Segment wise Revenue Analysis: Leisure wear, second largest segment is

growing highest, driving average realizations and profitability

Men innerwear, Brasseries, Women innerwear & Leisure wear sales grew 20.3%,

54.2% 51.4%, & 39.6% respectively. In volume terms, the reported growth was

7.1%, 44.5%, 25.5% & 29.7% respectively. On annual basis, sales grew 17.4%, 40.2%

33.3% & 32.8% respectively while volume growth was 12.7%, 40.0%, 19.5% &

26.3% respectively.

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June 04, 2013

Page Industries

Exhibit 3: Variance from Our Earlier Estimates

(Rs Mn) Previous Estimates Current Estimates Variance (%)

Parameter FY14E FY15E FY14E FY15E FY14E FY15E

Revenue 10,507 13,104 10,813 13,704 2.9 4.6

EBITDA 2,049 2,588 2,136 2,775 4.2 7.2

Net Income 1,403 1,794 1,449 1,895 3.3 5.6

EPS 126 161 130 170 3.3 5.6

ROCE (%) 35.9 37.7 35.3 37.5 (1.8) (0.3)

ROE (%) 57.8 54.8 59.4 59.8 2.9 9.1


According to our interaction with PI’s management, realization hike would be

decided in H2FY14 as there is an immediate cushion of around 5‐6% in the form of

excise duty removal to take on any escalation in input costs. We expect volume &

value CAGR of 18.8% & 26.1% over FY13‐15E.

We believe with strong brand positioning and successful price hikes in the past, PI

enjoys strong market position. It has successfully passed on ~20% price hike in

FY12 on higher input costs without rolling back as industry did with cooling

material prices. Moreover, its second largest segment‐ Leisure wear is growing

fast, where average realizations are high with better profitability, thus driving

blended realizations up.

Comparative Valuation in Consumer Discretionary Space

Exhibit 4: Comparative Valuation: Consumer Discretionary Players (Part ‐ I)

Mkt. Cap EPS PE(x) Sales CAGR EPS CAGR EBITDA CAGR

Company (US$ mn) FY13 FY14E FY15E FY13 FY14E FY15E FY13‐15 (%) FY13‐15 (%) FY13‐15 (%)

INDIA

Page Industries 829.4 100.9 129.9 169.9 41.8 32.5 24.8 26.0 29.8 30.0

Asian Paints 7,993.0 141.5 169.1 196.5 33.3 27.9 24.0 16.1 17.8 17.8

Jubilant Foodworks 1,311.3 27.0 37.4 49.2 42.1 30.4 23.1 32.5 34.9 33.9

Titan Industries 4,510.1 9.9 12.2 15.3 29.2 23.6 18.8 22.7 24.7 25.8

Average 36.6 28.6 22.7 24.3 26.8 26.9

Exhibit 5: Comparative Valuation: Consumer Discretionary Players (Part ‐ II)

P/BV(x) EV/EBITDA(x) RoE (%)

FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

INDIA

Page Industries 22.0 17.2 13.1 29.3 22.6 17.5 59.3 59.4 59.8

Asian Paints 11.0 9.1 8.5 21.8 18.1 15.4 35.8 35.3 39.0

Jubilant Foodworks 12.5 9.3 7.3 22.5 16.7 12.5 34.8 33.4 34.4

Titan Industries 9.9 7.7 6.0 19.8 16.1 12.5 38.9 36.9 35.9

Average 13.9 10.8 8.7 23.4 18.4 14.5 42.2 41.3 42.3

Source: Company, Bloomberg, Karvy Institutional Research

We believe, Page is evenly placed in a high growth consumer discretionary space,

with leading brand position in its segment, delivering consistent high performance

and growth amid challenging consumer sentiments during FY2013.

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June 04, 2013

Page Industries

Financials

Exhibit 6: Profit & loss statement Y/E Mar (Rs. mn) FY11 FY12 FY13 FY14E FY15E

Net revenues 4,916 6,834 8,635 10,813 13,704

% Growth 44.8 39.0 26.3 25.2 26.7

Raw Material 2,409 3,296 4,203 5,217 6,509

Staff 897 1,138 1,436 1,784 2,261

Operating Expenses 706 1,070 1,353 1,676 2,158

Operating expenses 4,012 5,504 6,992 8,677 10,929

EBIDTA 904 1,330 1,642 2,136 2,775

% Growth 37.6 47.2 23.4 30.0 29.9

EBIDTA margin (%) 18.4 19.5 19.0 19.8 20.3

Other income 121 184 208 270 343

Interest 52 67 80 96 105

Depreciation 98 106 114 148 184

Profit Before Tax 878 1,341 1,657 2,162 2,828

Provision for tax 292 441 531 714 933

Effective tax rate (%) 33.4 32.9 32.1 33.0 33.0

Adjusted Net Profit 585 900 1,125 1,449 1,895

% Growth 47.8 53.7 25.1 28.7 30.8

Reported Net Profit 585 900 1,125 1,449 1,895


Exhibit 7: Balance Sheet Y/E Mar (Rs. mn) FY11 FY12 FY13 FY14E FY15E

Equity capital 112 112 112 112 112

Reserves & surplus 1,126 1,546 2,024 2,627 3,482

Shareholders funds 1,238 1,658 2,135 2,739 3,594

Short term Loans 745 422 589 669 719

Long Term Loans 405 497 613 683 733

Total Loans 1,150 919 1,202 1,352 1,452

Deferred tax liability 26 36 57 57 57

Total Liabilities and Equity 2,414 2,613 3,394 4,148 5,103

Gross block 1,259 1,504 1,938 2,408 2,858

Depreciation 328 428 542 689 874

Net block 931 1,076 1,396 1,718 1,984

Capital WIP 74 27 27 27 27

Other Non‐current Assets ‐ 280 193 193 193

Investments 30 18 10 10 10

Inventory 1,647 1,726 2,350 2,919 3,700

Debtors 258 437 581 757 1,028

Cash & Bank Balance 26 31 46 44 44

Current Assets 2,384 2,333 3,102 3,893 5,022

Sundry Creditors 316 373 473 600 790

Other current liabilities 660 729 850 1,082 1,333

Current Liabilities 976 1,102 1,323 1,682 2,122

Net current assets 1,409 1,231 1,779 2,211 2,900

Total Assets 2,414 2,613 3,394 4,148 5,103


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June 04, 2013

Page Industries

Exhibit 8: Cash Flow Statement Y/E Mar (Rs. mn) FY11 FY12 FY13E FY14E FY15E

EBIT 806 1,224 1,529 1,988 2,591

(Inc.)/Dec in working capital (679) 172 (542) (433) (689)

Cash flow from operations 126 1,396 986 1,555 1,902

Other income 121 184 208 270 343

Depreciation 98 106 114 148 184

Interest paid (‐) (52) (67) (80) (96) (105)

Tax paid (‐) (292) (441) (531) (714) (933)

Dividends paid (‐) (338) (481) (650) (845) (1,040)

Deferred Tax Liability 6 10 22 ‐ ‐

Net cash from operations (331) 707 68 319 350

Capital expenditure (‐) (271) (197) (434) (470) (450)

Net cash after capex (602) 510 (366) (151) (100)

Inc./(Dec.) in short‐term borrowing 385 (323) 166 80 50

Inc./(dec.) in long‐term borrowing 218 92 116 70 50

Inc./(dec.) in borrowings 603 (231) 283 150 100

(Inc.)/Dec. in investments ‐ 12 8 ‐ ‐

Cash from Financial Activities 603 (219) 291 150 100

Others (4) (285) 89 ‐ ‐

Opening cash 30 26 31 46 44

Closing cash 26 31 46 44 44

Change in cash (4) 5 14 (1) 0


Exhibit 9: Key Ratios

Y/E Mar (Rs. mn) FY11 FY12 FY13 FY14E FY15E

Raw Material Cost / Sales (%) 49.0 48.2 48.7 48.3 47.5

Manpower Cost / Sales (%) 18.2 16.7 16.6 16.5 16.5

Operating & Other cost / Sales (%) 14.4 15.7 15.7 15.5 15.8

Revenue Growth (%) 44.8 39.0 26.3 25.2 26.7

EBIDTA Margins (%) 18.4 19.5 19.0 19.8 20.3

Net Income Margins (%) 11.9 13.2 13.0 13.4 13.8

ROCE (%) 27.0 32.7 34.6 35.3 37.5

ROE (%) 52.6 62.1 59.3 59.4 59.8


Exhibit 10: Valuation Parameters

Y/E Mar (Rs. mn) FY11 FY12 FY13 FY14E FY15E

EPS (Rs) 52.5 80.7 100.9 129.9 169.9

P/E (x) 80.4 52.3 41.8 32.5 24.8

BV (Rs) 111.0 148.6 191.4 245.6 322.2

P/BV (x) 38.0 28.4 22.0 17.2 13.1

EV/EBIDTA (x) 53.3 36.0 29.3 22.6 17.5

Fixed assets turnover ratio (x) 5.8 6.8 7.0 6.9 7.4

Debt/Equity (x) 0.9 0.5 0.5 0.5 0.4

EV/Sales (x) 9.8 7.0 5.6 4.5 3.5


Institutional Equities Team Rangachari Muralikrishnan

Head – Institutional Equities /

Research / Strategy +91‐22 61844301 [email protected]

K. Anant Rao Head ‐ Sales‐Trading & Derivatives +91‐22 61844303 [email protected]

Uday Raval Karvy Inc. USA +1 212 2674334 [email protected]

INSTITUTIONAL RESEARCH

Analysts Industry / Sector Desk Phone Email ID

Amey Chalke Research Associate ‐ Pharmaceuticals +91 ‐22 61844325 [email protected]

Hatim Broachwala, CFA Banking +91‐22 61844329 [email protected]

Kruti Shah, CFA Economist +91‐22 61844320 [email protected]

Manoj Kumar Manish Derivatives and Quant Analyst +91‐22 61844327 [email protected]

Maruti Kadam Research Associate +91‐22 61844326 [email protected]

Mitul Shah Automobiles +91‐22 61844312 [email protected]

Paresh Jain BFSI +91‐22 61844324 [email protected]

Parikshit Kandpal Infra / Real Estate / Strategy +91‐22 61844311 [email protected]

Rahul Sharma Pharmaceuticals +91‐22 61844310 [email protected]

Rahul Singh MidCap +91‐40‐44857911 [email protected]

Rajesh Kumar Ravi Cement & Logistics +91‐22 61844313 [email protected]

Rupesh Sankhe Power/Capital Goods +91‐22 61844315 [email protected]

Sagar Shah Media & Entertainment +91 22 61844316 [email protected]

Varun Chakri Research Associate +91 22 61844326 [email protected]

Vinay Nair Oil & Gas +91‐22 61844319 [email protected]

INSTITUTIONAL SALES

Dinesh Bajaj Sales +91‐22 61844341 [email protected]

R. Sriram Sales +91‐22 61844340 [email protected]

Shabbir Dahodwala Sales (USA) +1‐212‐2674334 [email protected]

Tejash Gandhi Sales +91‐22 61844345 [email protected]

INSTITUTIONAL SALES TRADING & DEALING

Bhavesh Gandhi Institutional Dealer +91‐22 61844368 /69 [email protected]

Prashant Oza Institutional Dealer +91‐22 61844370 /71 [email protected]

Gurdarshan Singh Kharbanda Sales Trader +91‐22‐61844368 / 69 [email protected]

PRODUCTION

Asim Kumar Mohapatra Editor +91‐22 61844318 [email protected]

Vijayalaxmi L. Moolya Production +91‐22 61844328 [email protected]

For further enquiries please contact:

[email protected]

Tel: +91‐22‐6184 4300

Disclosures Appendix

Analyst certification

The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed herein

accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their)

compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this

research report.

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