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Research
Angel Broking recommends Neutral on Page Industries - 3QFY2014 Result Update
Posted On : 2014-02-24 09:37:08( TIMEZONE : IST )
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.
