Page Industries - Upgrade to 'Accumulate' - Angel Broking

For 2QFY2013, Page Industries (Page) reported numbers in line with our expectations on all fronts. The company's top-line grew by 21.9% yoy to Rs.220cr from Rs.181cr in the same quarter last year, in-line with our estimate of Rs.215cr for the quarter. The EBITDA margin for the quarter expanded marginally by 30bp yoy and came in at 20.0%, against our estimate of 20.2%. Consequently, the company reported a profit of Rs.31cr, 21.4% higher yoy from Rs.25cr in 2QFY2012, in line with our estimate of Rs.30cr.

Huge market size and strong brand image to drive growth: According to industry reports, the Indian innerwear industry stood at Rs.14,000cr (in FY2011) and is expected to grow at 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 a market share of 21% in men's segment and 12% in women's segment, we expect Page to use the opportunity and report a revenue CAGR of 22.3% to Rs.1,023cr in FY2014E. This is also backed by the strong brand image and pan India distribution channel consisting of 400 distributors, 72 Exclusive JOCKEY® outlets and ~23,000 retail outlets across 1,200 cities.

Outlook and valuation: Expecting the company's revenue and profit to grow at a CAGR of 22.3% and 28.5% FY2012-14E over to Rs.1,023cr and Rs.149cr respectively in FY2014E and considering its robust RoE profile, we have assigned a P/E multiple of 27x for its FY2014E earnings. The stock is currently trading at a PE of 25.2x FY2014E earnings. We upgrade the stock to Accumulate with a target price of Rs.3,602, valuing the stock at 27x FY2014E earnings.

Source : Equity Bulls

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