Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Annual Report Analysis Page Industries Accumulate Despite demonetisation, Page Industries witnessed revenue growth of 18.7% YoY to ` 21,321mn in FY17. Implementation of GST will enable a shift from highly unorganized innerwear market leading to promising growth outlook for the organised market. Moreover, GST at 5% (for apparel below ` 1,000) is expected to have a positive impact on Page Industries volume growth and market position since a majority of its products are priced below ` 1,000 per piece. Page Industries with its strong brand recall of Jockey is expected to lead the market shift towards organised and premium innerwear segment. The company s strong in-house product development and manufacturing expertise combined with a very strong distribution network will support healthy sales growth and profitability in the coming years. Recommend Accumulate with a TP of ` 17,860. Apparel retail industry tuned for strong growth ahead Indian textile industry contributes to 10% of manufacturing production, 2% of India s GDP and to 13% of the country s export earnings. The share of apparel in Indian retail market is 8% with organised apparel retail contributing 21% of the total apparel retail. The innerwear market (comprising of the innerwear and the comfort wear market) is expected to grow at CAGR of 13% to reach ` 519.1bn between 15-. The men s segment is expected to grow at a CAGR of 9%, while, women s segment (~64% of total market share) is expected to grow at CAGR of 15% during the same period. With rising urbanization, high disposable income, a shift in market share from unorganised to organised players and increasing consumer preference for branded products, innerwear is expected to emerge as a promising segment in apparel retail. Page likely to take advantage of the acceleration Jockey brand is distributed in 1,400+ cities and towns and are available in >50,000 outlets spread across India. During FY17, the company through its authorised franchisees opened 101 EBOs including 5 Jockey Woman EBOs catering exclusively to women customers taking the total count to 360. We believe that the brand has strong recognition in the mid and high value segment and is a perfect match for the aspirational consumers. Going ahead, with the reducing price gap in the unorganized and organized segment, we believe that the branded textile segment in general and Page in particular would gain higher better traction. CMP ` 16,798 Target / Upside ` 17,860/6% BSE Sensex 32,021 NSE Nifty 9886 Scrip Details Equity / FV ` 112/` 10/- Market Cap ` 187bn USD 2.9bn 52-week High/Low ` 18,049/12,360 Avg. Volume (no) 21,4 NSE Symbol PAGEIND Bloomberg Code PAG IN Shareholding Pattern Mar 17(%) Promoters 49.0 MF/Banks/FIs 5.5 FIIs 36.1 Public / Others 9.4 Page Ind. Relative to Sensex 115 110 105 100 95 90 85 80 Page Ind. BSE Sensex FINANCIALS (` Mn) Particulars FY15 FY16 FY17 FY18E FY19E Net Sales 15,140 17,956 21,301 25,130 30,281 Growth (%) 29.1 18.6 18.6 18.0.5 EBITDA 2,899 3,752 4,132 5,050 6,211 OPM (%) 19.2.9 19.4.1.5 PAT (Adjusted) 1,960 2,315 2,663 3,233 4,001 Growth (%) 27.5 18.1 15.0 21.4 23.8 EPS (`) 176 8 239 290 359 Growth (%) 27.5 18.1 15.0 21.4 23.8 PER(x) 95.6 80.9 70.4 58.0 46.8 ROANW (%) 58.0 50.5 44.5 43.0 42.4 ROACE (%) 41.7 41.8 39.9 39.6 39.6 Sr. Analyst: Sachin Bobade Tel: +9122 4096 9731 E-mail: sachinb@dolatcapital.com Associate: Nikhar Koor Tel: +9122 4096 9764 E-mail: nikhatk@dolatcapital.com July 14, 17
Profit and Loss statement analysis July 14, 17 2 Despite a tough economic scenario, Page Industries posted total revenue growth of 18.7% YoY to ` 21,321mn in FY17 that is attributed to 13% YoY volume growth to 149.4mn pieces and 8.0% expansion in blended realisation (` 143/piece). Men s segment accounted for 47.2% (+18.8% YoY to ` 10,071mn), while, Leisure and Sports segment constituted 30.6% of total sales (+23.6% YoY to ` 6,515mn). The Speedo brand, a dominant brand in the premium swimwear market, achieved a turnover of ` 345mn in FY17 as against ` 295mn in FY16, demonstrating an increase of 17%. Speedo brand is available in 1,100 stores including 140 large format stores across 106 cities and 9 Exclusive Brand Outlets (EBOs). EBITDA grew 10.1% YoY to ` 4,132mn in FY17 with strong revenue growth. EBITDA margin contracted by 150 bps to 19.4% in FY17, mainly due to higher raw material (+.6% YoY) and employee costs (+.1% YoY). Profit before tax increased by 15.1% YoY to ` 3,948mn in FY17 from ` 3,431mn in FY16. Net profit stood at ` 2,663mn in FY17 representing a growth of 15.0% YoY driven by 148% YoY growth in other income. Owing to a healthy top-line growth and pretty stable margins, the company has been able to grow PAT consistently. Balance Sheet Analysis The company incurred capital expenditure of ` 679mn in FY17 compared to ` 238mn in FY16 in order to augment its production capacity. Depreciation expenses rose 2.5% YoY to ` 247mn during the year. Receivables increased 7.3% YoY to ` 1,099mn in FY17. However, receivable days improved from 21 days in FY16 to 19 days in FY17. Inventories rose by 15.2% YoY to ` 6.229mn in FY17. Inventory days declined from 110 days in FY16 to 107 days in FY17. While total borrowing reduced by 7.6% YoY to ` 877mn, total cash rose to ` 6mn in FY17 from ` 86mn in FY16. In FY17, return on net worth and return on capital employed stood at 44.5% and 39.9% respectively. Over the years, Page has maintained a dividend payout beyond 40%. During FY17, the company declared three interim dividends in May 16 (` 22 per share), Nov 16 (` 25 per share) and Feb 17 (` 25 per share) on an equity share value of ` 10 each and recommended a final dividend of ` 25 per share aggregating to a total dividend of ` 97 per share of an equity share value of ` 10 each amounting to ` 1,082mn for the year. Expansion and new investments To meet the growing market demand, Page Industries has geared up to augment its production capacity and has expanded its installed capacity across various units spread over 2.40mn sq. ft. in 17 locations in the state of Karnataka. The company has taken few backward integration initiatives which will bring speed and economy to the business. In this regard, the company has set up state of the art tape dyeing unit at Hassan, Karnataka which will help in catering to the needs of the women s range of business which is a fast fashion business. The company has started its trial operations and expects to attain its maximum capacity during FY18.
Additionally, the company also has laid the ground work for the in-house production of various women s range trims which are currently being imported. Operations are expected to commence in FY18. A further expansion has been planned in KIADB Industrial Area, Hassan, where five acres of land was allotted by KIADB on 99 years lease. Commercial production is expected to commence during FY18. Key Management Personnel Mr. Sunder Genomal has been reappointed as Managing Director of the Company for a term of 5 years starts from 1 August, 16 to 31 July, 21. The demise of Mr. Pius Thomas, Executive Director- Finance & Chief Financial Officer of the company on 7 April, 17. Mr. B C Prabhakar s initial term of Independent Director is expiring on 12 September, 17. The BOD recommended to re-appoint Mr. B C Prabhakar as Independent Director for another term of 5 years starts from 13 September, 17, subject to the approval of members at the AGM by way of special resolution. July 14, 17 3
22.4 30.5 31.3 29.6 29.2 33.7 34.6 32.8 31.2 40.9 38.3 35.6 34.6 2,789 3,783 3,896 3,774 3,7 4,383 4,537 4,331 4,244 5,724 5,347 5,287 4,995 Page Quarterly Margins Net Sales Growth 70 60 50 40 30 10 0 52.3 51.2 52.0 53.4 53.3 52.1 53.3 55.1 54.8 55.1.0 21.9 Gross margin % EBITDA margin % 64.6 59.7 59.7 17.4 19.1 18.5 21.3.6 19.0 18.9 19.1.1 18.8 19.5 7,000 6,000 5,000 4,000 3,000 2,000 1,000-34.2% 24.4% Net Sales (` mn) Growth % 35.5% 24.8% 33.4% 14.8% 15.9% 16.4% 14.1% 30.6% 22.1% 17.7% 17.9% 40% 35% 30% 25% % 15% 10% 5% 0% Total Volume (mn pieces) Volume (mn pieces) Growth % 45 35% 30.3% 40 30% 21.1% 35 21.3% 25% 16.6% 15.2% % 30 9.0% 10.6%10.4%10.6% 10.7% 10.8% 15% 25 8.7% 10% 7.0% 5% 15 0% 140 1 100 80 60 40 Realisation (`/piece) 125 124 124 127 127 130 131 132 136 136 136 146 142 Men (mn pieces) Women (mn pieces) 25 15 10 12.6 23.7 22.9 18.3 19.6 19.8.7 19.5 19.5 19.6 17.7 17.5 17.3 10 8 6 4 4.6 6.4 5.9 5.5 5.7 7.8 6.7 6.7 6.5 9.1 8.0 7.4 7.2 5 0 2 0 July 14, 17 4
Income Statement (` mn) Net Sales 17,956 21,301 25,130 30,281 Other income 98 243 268 295 Total Income 18,054 21,545 25,398 30,576 Total Expenditure 14,4 17,169,080 24,070 Operational / Direct Exp 8,638 10,418 12,289 14,553 Employee Expenses 3,127 3,756 4,583 5,591 Other Exp 2,440 2,995 3,9 3,926 EBIDTA (Excl. OI) 3,752 4,132 5,050 6,211 EBIDTA (Incl. OI) 3,850 4,376 5,318 6,506 Interest 178 180 215 215 EBDT 3,672 4,195 5,103 6,291 Depreciation 241 247 277 319 PBT 3,431 3,948 4,825 5,971 Tax 1,116 1,285 1,592 1,971 Net Profit 2,315 2,663 3,233 4,001 Balance Sheet (` mn) Sources of Funds Equity Capital 112 112 112 112 Other Reserves 5,187 6,546 8,266 10,395 Net Worth 5,299 6,658 8,378 10,506 Secured Loans 949 877 9 9 Loan Funds 949 877 9 9 Deferred Tax Liab 79 112 100 100 Total Capital Employed 6,327 7,646 9,398 11,526 Applications of Funds Gross Block 2,408 2,764 3,164 3,664 Less: Acc Dep 241 403 680 1,000 Net Block 2,167 2,361 2,484 2,665 Capital Work in Progress 4 241 0 0 Current Assets, Loans & Advances Inventories 5,408 6,229 7,815 9,416 Sundry Debtors 1,024 1,099 1,618 1,950 Cash and Bank Balance 86 6 745 618 Loans and Advances 318 249 1,239 1,493 sub total 6,837 7,783 11,417 13,477 Less: Current Liabilities & Provisions Current Liabilities 2,040 2,749 3,898 3,898 Provisions 640 511 605 717 sub total 2,680 3,260 4,503 4,615 Net Current Assets 4,156 4,522 6,914 8,862 Total Assets 6,327 7,646 9,398 11,526 E Estimates Cash Flow (` mn) Profit before tax 3,431 3,948 4,825 5,971 Depreciation & w.o. 241 247 277 319 Net Interest Exp 178 180 215 215 Direct taxes paid (1,116) (1,285) (1,592) (1,971) Chg. in Working Capital (962) (247) (1,852) (2,075) (A) CF from Opt. Activities 1,773 2,843 1,873 2,460 Capex (238) (679) (159) (500) Free Cash Flow 1,534 2,164 1,715 1,960 (B) CF from Invt. Activities (238) (1,0) 362 (500) Issue of Equity/ Preference 168 17 (11) 0 Inc./(Dec.) in Debt (395) (72) 43 0 Interest exp net (178) (180) (215) (215) Dividend Paid (Incl. Tax) (1,087) (1,289) (1,513) (1,872) (C) CF from Financing (1,492) (1,524) (1,696) (2,087) Net Change in Cash 42 119 540 (128) Opening Cash balances 44 86 6 745 Closing Cash balances 86 6 745 618 Important Ratios (A) Measures of Performance (%) EBIDTA Margin (excl. O.I.).9 19.4.1.5 Interest / Sales 1.0 0.8 0.9 0.7 Gross Profit Margin 51.9 51.1 51.1 51.9 Tax/PBT 32.5 32.6 33.0 33.0 Net Profit Margin 12.9 12.5 12.9 13.2 (B) As Percentage of Net Sales Raw Material 48.1 48.9 48.9 48.1 Employee Expenses 17.4 17.6 18.2 18.5 Other Exp 13.6 14.1 12.8 13.0 (C) Measures of Financial Status Debt / Equity (x) 0.2 0.1 0.1 0.1 Interest Coverage (x) 21.6 24.3 24.7 30.3 Average Cost Of Debt (%) 15.5 19.7 23.9 23.4 Debtors Period (days).8 18.8 23.5 23.5 Closing stock (days) 109.9 106.7 113.5 113.5 Inventory Turnover Ratio (x) 3.3 3.4 3.2 3.2 Fixed Assets Turnover (x) 7.5 7.7 7.9 8.3 WC Turnover (x) 4.3 4.7 3.6 3.4 Non Cash WC (` Mn) 4,070 4,317 6,168 8,244 (D) Measures of Investment EPS (`) 7.6 238.7 289.8 358.7 CEPS (`) 229.2 260.9 314.7 387.3 DPS (`) 83.3 97.0 115.9 143.5 Dividend Payout (%) 40.1 40.6 40.0 40.0 Profit Ploughback (%) 59.9 59.4 60.0 60.0 Book Value (`) 475.1 596.9 751.1 941.9 RoANW (%) 50.5 44.5 43.0 42.4 RoACE (%) 41.8 39.9 39.6 39.6 RoAIC (%) 62.6 60.4 62.6 63.3! (E) Valuation Ratios CMP (`) 16,798 16,798 16,798 16,798 P/E (x) 80.9 70.4 58.0 46.8 Market Cap. (` Mn) 187,363 187,363 187,363 187,363 MCap/ Sales (x) 10.4 8.8 7.5 6.2 EV (` Mn) 188,225 187,513 187,537 187,665 EV/Sales (x) 10.5 8.8 7.5 6.2 EV/EBDITA (x) 50.2 45.4 37.1 30.2 P/BV (x) 35.4 28.1 22.4 17.8 Dividend Yield (%) 0.5 0.6 0.7 0.9 E Estimates July 14, 17 5
DART RATING MATRIX Total Return Expectation (12 Months) Buy > % Accumulate 10 to % Reduce 0 to 10% Sell < 0% DART Team Purvag Shah Principal purvag@dolatcapital.com +9122 4096 9747 Amit Khurana, CFA Head of Equities and Head of Research amit@dolatcapital.com +9122 4096 9745 CONTACT DETAILS Equity Sales Designation E-mail Direct Lines Kishor Bagri, CFA VP- Equity Sales kishorb@dolatcapital.com +9122 4096 9746 Kartik Sadagopan VP- Equity Sales kartiks@dolatcapital.com +9122 4096 9762 Kapil Yadav VP - Institutional Sales kapil@dolatcapital.com +9122 4096 9735 Yomika Agarwal VP - FII Sales yomika@dolatcapital.com +9122 4096 9773 Equity Trading Designation E-mail P. Sridhar Head - Sales Trading (Equities) sridhar@dolatcapital.com +9122 4096 9728 Chandrakant Ware AVP - Equity Sales Trading chandrakant@dolatcapital.com +9122 4096 9707 Derivatives Trading Designation E-mail Shirish Thakkar AVP - Derivatives shirisht@dolatcapital.com +9122 4096 9702 Hardik Mehta Sales Trader hardikm@dolatcapital.com +9122 4096 9748 Dolat Capital Market Private Limited., Rajabahadur Mansion, 1st Floor, Ambalal Doshi Marg, Fort, Mumbai - 400 001
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