INSTITUTIONAL EQUITY RESEARCH
Page Industries (PAGE IN)
Dominance to continue
INDIA | RETAIL | INITIATING COVERAGE 15 April 2021
Page Industries (licensee of Jockey innerwear in India) will outperform over the next three BUY years driven by: (1) Strong MBO distribution reach, which has significant scope to grow in tier- CMP RS 29390 2/3 cities, with distributor RoIs remaining high; (2) EBO expansion, which would aid growth for outerwear and premium innerwear; (3) customer preference for leisure wear and active wear, TARGET RS 34250 (+17%) which would drive athleisure’s share, given its affordable price points; (4) maintained market COMPANY DATA leadership in women’s innerwear with regular product launches, standalone EBOs, and focus O/S SHARES (MN) : 11 on comfort rather than fashion; (5) grow marginally ahead of the industry in men’s innerwear, MARKET CAP (RSBN) : 328 with increasing market-share improvement for the mid-premium segment; (6) investment in MARKET CAP (USDBN) : 4.5 digital transformation to strengthen the supply chain, coupled with increasing share from 52 - WK HI/LO (RS) : 32206/16430 online sales. Margin expansion, improving return ratios, debt-free balance sheet, and high LIQUIDITY 3M (USDMN) : 19.6 dividend pay-out is an added positive. Initiate coverage with a target price of Rs 34,250. BUY. PAR VALUE (RS) : 10
Distribution is the backbone of Page’s success: A bulk of Page’s growth in the last decade has SHARE HOLDING PATTERN, % been due to a strong distribution network of 72,000 retail touch points across 2,890 cities/towns, Mar 21 Dec 20 Sep 20 3,900+ LFS point of sales, 900 EBOs across 300 cities, and 3,860 exclusive distributors. We believe PROMOTERS 53.2 53.2 53.2 there is a significant scope to increase its distribution channel in smaller cities, with customer DII 3.2 3.2 3.6 OTHERS 27.3 27.3 27.3 preference moving to organised players from unorganised, and customers migrating to the mid- PROMOTERS 53.2 53.2 53.2 premium segment from mass. ROIs for distributors and EBO franchise owners continue to remain 20%+, which helps Page attract new partners. Online presence across own websites and PRICE VS. SENSEX marketplaces will help the company to grow its share, and compete with ‘direct-to-customer’ 160 brands, which could account for near double-digit in revenues over two years. Outerwear gaining strength after covid-19: Outerwear, which accounts for 30% of revenue, 120 should grow ahead of Page’s overall growth, led by an increasing work-from-home culture, importance of personal hygiene, sports-inspired active-wear, and sleepwear/loungewear. 45-50% of EBO revenues are from outerwear, which would continue to drive growth with store 80 expansions, while product portfolios across affordable price points and focus on comfort and regular new collection launches would help Page differentiate itself from competition. 40 Market leader in women’s and men’s innerwear: Jockey is the market leader in women’s Jan/18 Jan/19 Jan/20 Jan/21 innerwear – with 3x revenues vs. its nearest competitor. With a focus on comfort rather than Page Ind BSE Sensex fashion in a price-sensitive segment, and new collection launches every year, Jockey has Source: PhillipCapital India Research performed better than competition across KPIs in our analysis of 7 unlisted companies. In men’s innerwear, we expect Page to grow marginally ahead of the industry, as Jockey has been able to KEY FINANCIALS raise its market share, with increasing investments in digital transformation, coupled with Rsmn FY21E FY22E FY23E increasing reach and the mid-premium category growing faster than mass/economy segment, Net Sales 27,742 36,648 42,295 where Jockey is not present. EBIDTA 5,568 8,016 9,705 Net Profit 3,544 5,256 6,391 Financials: We expect Page to post revenue CAGR of 15% over FY22-24, to touch Rs 48.8bn; over EPS, Rs 317.7 471.2 573.0 the long run, it can consistently deliver low teens revenue growth on 5-7% growth in pricing and PER, x 92.5 62.4 51.3 volume. EBIDTA would see a CAGR of 19% over FY22-24 to Rs 11.3bn in FY24 compared to Rs EV/EBIDTA, x 58.8 40.9 33.7 5.3bn in FY20, with margins at 23.3%. PAT should see a CAGR of 19.5% over FY22-24 to Rs7.5bn. P/BV, x 36.6 28.7 22.7 Return ratios should improve significantly, with RoIC at historic highs of 50% in FY24, while ROE, % 41.3 51.6 49.4 RoE/RoCE would be at 47%/40% respectively. Debt/Equity (%) 0.2 0.2 0.1 Valuation and View: We initiate coverage on Page with a BUY rating and a target of Rs 34,250 Source: PhillipCapital India Research Est.
(55x Sep’23e EPS of Rs 623). We expect it to grow ahead of the industry in women’s innerwear and outerwear, while in men’s innerwear its growth should be marginally ahead of the industry’s. Ankit Kedia, Research Analyst Strong pricing power and investments in digital/business transformation will help the company (+ 9122 6246 4122) [email protected] achieve stable margins. Its industry-leading cash-conversion cycle, debt-free balance sheet, and 50%+ dividend pay-out gives it an edge. Key risks are: aggressive investment by private label retailers in the innerwear category, and reducing RoIs for distributors/EBOs.
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.
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Distribution: Backbone to the success of Page
We believe distribution is the key to Page Industries’ success. This is because of its presence across all channels to tap into customer demand. While its competition relies on the wholesale model, Page is one of the few companies to have an exclusive distributor presence on the ground; c.69% of its revenue comes from multi brand outlet (MBOs) which is led by its distributor channel that offers it a pan-India reach into 2,890+ cities and towns. Page has partnered with 23 large-format stores (LFS) which equals 2,450+ stores and 3,900+ point-of-sale across the country after 9MFY21, which has substantially increased from FY20. Page Industries was the first company to have an exclusive brand outlet (EBO) store for its innerwear brand Jockey in India. Today, the company has over 900 EBO stores pan India in 300+ cities.
Revenue contribution across channels Strong presence across channels for Page Industries (FY20)
5%
MBO 19% LFS 8% EBO 69% Online
Source: Company, Phillip Capital India Research
Jockey has a strong presence across all distribution channels MBO LFS EBO Own Website Online Marketplace Innerwear Brands Rupa Y N Y Y Y TT Garments Y N Y Y Y Dollar Y N Y Y Y VIP Y Y Y Y Y Amul Y N N N Y Playboy Y N N N Y Hanes N Y N N Y Dixcy Y N Y N Y Jockey Y Y Y Y Y Lux Y Y Y N Y Fashion brands Levis Y Y Y Y Y UCB Y Y Y N Y M&S N N Y Y Y FCUK Y Y Y N Y CK N Y Y N Y Armani N N Y N Y US Polo Y Y Y N Y Tommy Hilfiger N N Y N Y Pepe Y Y Y N Y Van Heusen Y Y Y Y Y Park Avenue Y N Y N Y Source: Galleria Intima Whitepaper, Phillip Capital Research
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Some facts about its retail network reach and depth Jockey’s retail network has touched 72,300+ stores across India, from 50,000+ stores in FY18 and 30,000+ stores in FY15. However, its retail network reach is significantly lower compared to some of the other men’s innerwear brands, predominantly as these brands offer mass products at lower price points. We believe 60% of Jockey’s business comes from metros and A-class cities; the rest from smaller B/C-class cities and towns. Increased depth in metros would help the company gain market share and maintain its dominance while rising penetration in the smaller cities/town would help it to gain market share in these cities hence eventually aid volume growth. Our channel checks suggest that despite the company having lesser retail touch points than competitors, it has more display area in each store, which leads to higher revenue-per-store.
Distribution network and methodology Page has 3x the number of distributors compared to competitors, as it divides (1) areas and towns and (2) and also the product/category offering, across multiple distributors. Page has eight categories (3 categories in men’s innerwear; 2 in women’s innerwear; 2 in outerwear; and 1 in Jockey Junior) for which the company appoints distributors. On an average one distributor has less than two categories to market – this strategy has helped the company to sell more from the same retail network, as multiple Jockey distributors approach the same retailer for different categories. Hence, all the products of the company are marketed and pushed to the retailer, which offers them scope to invest more in product development and premiumisation.
Page takes an average of one-month of sales revenue as deposits from distributors and currently it has distributor deposits of Rs 1.8bn, which account for 23 days of its sales. Over the last couple of years, it has increased its distributors’ incentives because of increasing competition from new brands in the market.
Significant scope to grow Jockey’s retail network (numbers) Distributor strength for Jockey is 3x competition 250000 4000
200000 3500 3000 150000 2500 100000 2000
50000 1500
0 1000 500
0 VIP Dollar Lux Rupa Dixcy Jockey
Source: Company, Phillip Capital India Research
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Distributor incentives are rising (Rs Mn) Distributors’ deposits with the company are also rising
400 Incentive % of gross sales 7% 2000 Dealer Deposit (Rsmn) Deposit days on sale 25 350 6% 300 1600 20 5% 250 4% 1200 15 200 3% 150 800 10 2% 100
50 1% 400 5 0 0% 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: Company, Phillip Capital India Research
Our analysis of distributors’ income + the auto-replacement system We believe that with two categories to market, a distributor would have c.22% RoI. Typically, a distributor’s commission is 9% + 2% cash discount. Page has implemented something called auto-replacement system (ARS), under which the distributor inventory would not increase beyond 45 days, and would not fall below 27 days. There is a pre-decided stock level for every SKU, and when it falls below, every Tuesday and Friday, automatic orders are placed and the inventory is supplied to distributors. ARS helps Page to increase the fill rates at the retailer level, as previously, distributors didn’t have the relevant SKUs available on time. This increases the distributors’ RoIs as the inventory in the channel remains in control. Currently, only 60% of Page’s distributors have implemented ARS.
Distributor RoI remains more than 18% 1 Category 2 categories Comments Monthly Sales (Rs Mn) 3.0 5.5 Distributor Margin% 10.3% 10.3% On cost price 9%+2% CD, on selling price 10.3% Revenue (Rs) 307500 563750 Interest from Page Industries 20000 36667 8% interest on deposit to company Total Income 327500 600417 Monthly Expenses (Rs) Office/Godown 30000 35000 Includes electricity, rent / 2 categories need bigger space Stock Delivery /Transportation 18750 18750 Rs750/day; 25 working days, includes tempo cost, Tier-II city Rs500/day Sales Executives 30000 45000 2 sales exec, salary 15000/month; 2 categories-3 sales executives Executive travel cost 5000 7500 Rs100/day/executive Godown stock keeper 14000 14000 Manages office, handles dispatches, office boy work etc Accountant 15000 15000 Can be done by owner himself Other office expenses 10000 10000 Total Expenses 122750 145250 EBIDTA 204750 455167 Investment (Rs Mn) Inventory 4.5 8.3 45days inventory Market credit 6 11 60 days receivable days from retailers Office Deposit 0.2 0.2 6 months rental as deposit Deposit to Page 3.0 5.5 1 month sale is kept as deposit; company pays interest 8% Total investment 13.68 24.96 RoI 18.0% 21.9% Source: Phillip Capital India Research
In the premium category Van Heusen innerwear is a formidable competitor Van Heusen has increased its distribution retail reach to 20,000 outlets in less than three years. Along with a superior product offering, it provides high trade discounts and incentives, which has increased its reach. It has achieved revenues of Rs 2.8bn
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PAGE INDUSTRIES INITIATING COVERAGE within three years of launch, led by outerwear, which we believe constitutes 50% of its revenues.
Van Heusen is expanding its retail reach aggressively Van Heusen’s athleisure/innerwear revenues (Rs mn) 5000 25000 4500
20000 4000 3500 15000 3000 2500 10000 2000
5000 1500 1000 0 500 0 FY18 FY19 FY20 FY21e FY22e FY23e
Source: Company, Phillip Capital India Research
Expansion of exclusive brand outlets (EBOs) to continue Page is aggressively expanding its EBO count and has opened 430 stores in the last 3.5 years, taking its total EBO count to 900 stores in FY21e, compared to 360 stores in FY17. More than 830 stores are unisex, 43 are exclusively for women, and 28 are exclusively for juniors. More than 700 stores are located on high streets giving the company an excellent branding opportunity; 200 stores are located in malls. Page has a strong presence in south India; 44% of its stores are in the five south India states. 15% of its stores are in west India. In a bulk of the cities, Page has only 1 EBO; hence, it has a presence in 300+ cities and towns. Only in 9 cities, it has 10+ EBO stores. In Bangalore and Hyderabad, it has 120+ stores cumulatively.
Our channel checks suggest that EBOs help Page to sell premium products, athleisure, and outerwear. In fact, more than 50% of the revenue of an EBO comes from outerwear products. In these stores, Page is able to display its full range to customers, which is not possible in MBO (multi-brand outlet) stores, which tend to have limited shelf space. Hence, EBOs help the company to garner premium customers.
Jockey continues to expand EBOs High concentration of EBOs in south India
800 No of EBOs Gross Store Addition 180 700 160 10% 19% North 600 140 120 500 15% South 100 400 East 80 300 60 West 12% 200 40 Central 100 20 44% 0 0
Source: Company, Phillip Capital India Research
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Cities that have 10+ Jockey EBOs Jockey EBOs have a premium look and feel
Ahmedabad
Delhi
Kolkatta
Pune
Mumbai
Jaipur
Chennai
Hyderabad
Bangalore
0 10 20 30 40 50 60 70
Source: Company, Phillip Capital India Research
Some facts about EBO operations All of Page’s EBOs are franchise stores and operated by the franchise themselves. Franchise owners have an investment of c.Rs 6mn + they have to provide a bank guarantee of Rs 500,000 to Page. Typically, it has a capex of Rs 2,000 per sq. ft. (complete renovation every 5-6 years) and the EBO is of 800-1,500 sq. ft., depending on the location. EBOs make the same margin as the retailer across the products, but EBO make an extra 7% margin because they have to pay distributors in 21 days, compared to the 45-60 credit days that retailers enjoy. Our channel checks suggest that the company doesn’t open more than one EBO in a small city, as it doesn’t cannibalise the revenues for the stores.
EBO payback in three years Metro Tier-I/II City Comments Monthly Sales (Rs Mn) 1.5 1.15 Rs 11000-13000/sqft sales They get 7% (3.5% company, 3.5% distributor) extra margin compared to retailer for EBO margin 31% 31% payment in 21 days. Margin vary by category Revenue (Rs) 465000 356500 Expenses (Rs) Rent 210000 120000 Metro -Rs175/sqft, Tier-I/II city Rs120/sqft Sales Executives 60000 56000 4 sales executives (2 men + 2 women) Store Manager + Accountant 20000 18500 1 person Electricity 35000 33000 Sales Incentive to staff 22500 17250 1.5% of sales on achieving target Other expenses 8000 8000 Total Expenses 355500 252750 EBIDTA 109500 103750 Investment (Rs Mn) Capex 2.4 2.0 Rs 2,000 per sq. ft. Inventory 3.0 2.3 2-month inventory Deposit for property 1.9 1.1 9 months rental as deposit Total 7.3 5.4 Source: Phillip Capital India Research
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Online to get a fillip post Covid-19 Page Industries’ online revenues in FY20 were Rs 1.4bn or 4.5% of total, and we expect these to get a boost in a post-covid world. The share of online revenues could increase to double digits in FY21, as customers now prefer to buy athleisure and innerwear online, instead of walking to a nearby store. Jockey’s complete product range is available on its own portal, which helps to bring in new customers; it is also available across third-party marketplaces and e-commerce sites such as Amazon, Flipkart, and Myntra.
Our channel check on Myntra showed that the second-highest number of SKUs available were Jockey men’s innerwear; these had the preferred slot too, which garners the highest eyeballs, and increases conversion rates substantially. However, for its women’s and athleisure collection, Jockey was not in the top searches on Myntra, which suggests that the appeal for these products was lesser.
Share of online sales across retailers/brands in FY20 Jockey’s online portal has its complete product range
Online Revenue (Rsmn) % share of total 7000 16% 6000 14% 5000 12% 10% 4000 8% 3000 6% 2000 4% 1000 2% 0 0%
Source: Company, Phillip Capital India Research
Jockey had the preferred spot on Myntra
Source: Company, Phillip Capital India Research
Jockey had the second-highest number of SKUs and was the first in terms of display to customers
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Seamless digital transformation to aid growth Page’s management continues to make investments in its digital and business transformation to strengthen efficiencies, automation, and speed to market. Some of the areas of digital/business transformation include – sales force automation, warehouse management systems, distributor management systems, auto replenishment system, and more recently, assortment generators, separate MIS for sales analytics, and JDA, a supply-chain planning tool.
JDA (Blue Yonder) will help Page create a demand tool that will be put into SAP for ‘producing for demand’ at the manufacturing end. This helps it to plan production for the right SKU. Distribution management software (DMS): Page will have a clear view of the inventory at the distributors’ warehouse once goods leave its warehouses and reach its distributors. Auto replenishment system (ARS): DMS (above) is linked to ARS. It joins the distributor inventory with the paid inventory so that when it falls below a certain level, an automatic order is raised from the distributor and supplied from Page’s warehouse. 80% of the distributors have been covered under ARS currently. Sales Force Automation (SFA): For tertiary sales, an SFA tool helps to get the orders from the market, to be consolidated in real time. In the past, all the orders would be collected by the end of the day, and billing would have happened the next day. After SFA, all orders that come in before 2:00pm get delivered on the same day by EOD (end-of-day). Hence, there is near-zero sales loss and the consumers receive what they want across MBOs, EBOs, or LFS stores. Assortment planner helps the EBOs and distributors get the right inventory – what sells against what they want to sell. This gives the company the capability to manufacture/deliver the right inventory for each distributor/EBO depending on the catchment area.
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Athleisure gaining strength post Covid Page Industries extended its success in innerwear with category extensions into athleisure, outerwear, and sleepwear – via a focus on comfort and affordable pricing. Growth rates for athleisure and outerwear have been ahead of the company’s overall growth rates for the last decade; 30% CAGR over FY11-20 vs. 24%. As a result, the share of outerwear increased to c.33% in FY20 from c.21% in FY10. Traditionally, Page has had a 7% CAGR in price increase and premiumization, while the rest of the growth was led by volumes. ASP (average selling price) for the company is Rs 235-250 for outerwear.
After Covid-19, athleisure has gained ground This is due to the increasing work-from-home culture, coupled with a need to wear comfort clothing. We believe sports-inspired apparel wear has been the fastest- growing category in the apparel space, with higher importance to personal hygiene, increasing disposable income, evolving lifestyle, improved standard of living, and changing preferences of consumers.
Increasing contribution from athleisure for Page Growth in athleisure is ahead of company growth
Revenue (Rs Mn) % of sales Athleisure Rev Growth Company rev Growth 12000 35% 70%
10000 30% 60% 25% 8000 50% 20% 40% 6000 15% 30% 4000 10% 20% 2000 5% 10%
0 0% 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: Company, Phillip Capital India Research
Taking on sports-wear brands Pure-play sports-wear brands such as Nike, Adidas, Reebok, Puma, and Decathlon address the intimate-wear category linked to performance sports. Core innerwear brands such as Jockey have created sporty silhouettes and an overall active look within their innerwear lines and are working on clean sports-inspired active-wear demands from consumers, trying to give their products an edgy look with strong colour combinations.
Global footwear brands such as Nike, Adidas, and Puma get 25-35% revenue from apparel sales in India at premium price points. Recognising the opportunity, Page has regularly launched new collections in its outerwear category for men, women, and kids. Lately, it has launched its ‘MOVE’ collection, which competes directly with global pure-play sports-wear players. With this collection, Page offers differentiation in an increasingly competitive market, and allows for a more premium price position for its outerwear category.
New trends in athleisure Consumers are increasingly getting accustomed to buying specialised clothing for a particular occasion, leading to the growth in category. For example, female customers prefer high-impact sports bras for vigorous activities and low-impact ones for low-intensity workouts. We believe innovation will define the future of the athleisure category as new-age clothing will progress towards advanced materials
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(for heat reversing, moisture absorption, heat generation, etc.) which will provide ultimate comfort and flexibility for an active lifestyle, both indoors and outdoors.
Sleepwear and loungewear categories are evolving Further the sleepwear/loungewear category is shifting from the notion of boring nightwear to becoming a wardrobe essential. They have also become a fashion statement with increased number of casual gatherings like pajama parties, movie nights and destination weddings. Further celebrities have been using sleepwear as streetwear making it extremely aspirational for customers. Even in large format stores, space for loungewear and sleepwear has increased since the business is now similar to lingerie. We believe a lot of focused standalone EBO stores of sleepwear and activewear have come up as well. Our channel checks suggest c.50% of Jockey EBOs’ revenue is from outerwear and it has been one of the key pillars for strong growth in this category for Page.
Global sports-wear brands have strong athleisure presence Healthy double-digit volume growth in athleisure for Page in India Volume growth Realisation Growth 50.0 6000 Apparel Revenue (Rs Mn) % of total revenue 40% 45.0 35% 5000 40.0 30% 35.0 4000 25% 30.0 25.0 3000 20% 20.0 15% 15.0 2000 10% 10.0 1000 5.0 5% 0.0 0 0% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Puma Adidas Nike Reebok
Source: Company, Phillip Capital India Research
Jockey launches active wear to directly compete with global Outerwear collection launches over the years brands Year Men’s Outerwear Women Outerwear Kids Outerwear FY10 Sport Comfort Stretch NA FY12 NA 24X7 Relax NA FY16 USA Original NA USA Original FY18 Jockey Athleisure Jockey Athleisure Girls Outerwear FY19 MOVE activewear MOVE activewear NA
Source: Company, Phillip Capital India Research
Success in outerwear for Page Industries The company will get stronger with a pan-India presence, increasing dominance, product portfolio across affordable price points, and focus on both comfort and launching new collections regularly. Key long-term growth trends will be driven by increasing purchasing power and disposable income with consumers from tier-2/3 cities and towns, coupled with the market gradually moving in the direction of becoming organized – from currently being highly unorganised.
Our analysis on pricing for men’s shorts, track pants, and t-shirts suggests that Jockey has the lowest entry-level pricing among multiple brands. However, the number of SKUs available on Myntra is very small compared to Jockey’s own website. Further,
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PAGE INDUSTRIES INITIATING COVERAGE new brands such as HRX (available only on Myntra), which is at a marginal premium to Jockey, has 2-3x higher SKUs available online – which has become the preferred go-to channel for customers.
Men’s shorts price range (Rs) Men’s shorts SKUs availability (numbers)
Myntra Own website Van Heusen 250
Jockey 200 Proline 150 HRX
Reebok 100 Adidas 50 Puma
Nike 0 Nike Puma Adidas Reebok HRX Proline Jockey Van 0 1000 2000 3000 4000 5000 6000 7000 Heusen
Source: Company, Various website, Phillip Capital India Research
Men’s track pants price range (Rs) Men’s track pants SKU availability (numbers)
Myntra Own website Van Heusen 350
Jockey 300
Proline 250
HRX 200
Reebok 150
Adidas 100
Puma 50
Nike 0 Nike Puma Adidas Reebok HRX Proline Jockey Van 0 2000 4000 6000 8000 10000 12000 Heusen
Source: Company, Various website, Phillip Capital India Research
Men’s T-shirts price range (Rs) Men’s t-shirts SKU availability (numbers)
2000 Myntra Own website Van Heusen
Jockey 1600 Proline 1200 HRX
Reebok 800
Adidas 400 Puma
Nike 0 Nike Puma Adidas Reebok HRX Proline Jockey Van 0 1000 2000 3000 4000 5000 6000 7000 Heusen
Source: Company, Various website, Phillip Capital India Research
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Leader in highly fragmented women’s innerwear
Market leader in organised women’s innerwear category Jockey’s revenues are 3x its nearest competitor’s in women’s innerwear, a category that currently accounts for c.21% of Page Industries’ revenues, up from 16% in FY10. While realisation growth has been similar for both brasseries and bottoms (underpants) at 7.3% over FY11-18, volume growth for brasseries is much ahead; brasseries/bottoms revenue CAGR is 38%/25% over FY11-18. Realisation for brasseries is 3x of bottoms, hence, with higher volume growth, brasseries’ revenue contribution in women’s innerwear has increased to 50%+ currently for Page, from 32% in FY10.
Jockey is 3x nearest competitor in women’s innerwear… …led by strong volume and pricing growth (%) (Rs mn) Volume growth Realisation Growth 6000 30
5000 25
4000 20
3000 15
2000 10
1000 5 0 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Source: Company, MCA,Phillip Capital India Research; Note: FY19 revenue
Brasseries CAGR at 38% vs. 25% for bottoms over FY11-18 FY11-18 realisations CAGR of 7% for women’s innerwear (Rs)
Brasseries (Rsmn) Lowers (Rsmn) 350 Brasseries Lowers % growth Brasseries % growth lowers 3000 70 300 60 2500 250 50 2000 200 40 1500 150 30 1000 20 100
500 10 50
0 0 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Source: Company, Phillip Capital India Research
Innerwear, particularly brassieres, is a highly ‘conscious’ market We believe that the women’s innerwear market is quite price sensitive, which is why Jockey has always focused on comfort rather than fashion. Women bottom-wear (underpants) tends to be highly basic, while brasseries need higher number of SKUs due to wide variation in chest and cup sizes and preference for colours and styles. Besides, customers seek out use-specific products such as seamless bras, strapless bras, padded bras, and bralettes. The demand for functionality-based women’s innerwear is also rising – this includes shapewears and tummy tuckers for women looking to slim their silhouette; non-wired brassieres for women who face discomfort
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PAGE INDUSTRIES INITIATING COVERAGE issues due to prolonged use of wired products; sports bras suitable for physically active women.
We believe women are conscious about their intimate-wear brands and styles, not just in metros, but also in smaller towns and cities. In order to cater to the growing demand, Page has launched new collections for women’s innerwear every year; this has helped them stay ahead of competition. Disruptive ad campaigns and dedicated women EBOs have also helped Page to differentiate from competition.
Ad campaigns for women’s innerwear Regular collection launches in women’s innerwear Year Women’s Innerwear FY10 Women’s 24X7 Stretch Range Lace Essence FY11 Signature Stretch Fashion Stretch FY12 Essence FY13 No panty line-Shapewear range FY14 Seamless Shapewear FY15 International collection FY16 POP Colour FY17 Lace Essentials FY18 USA Original FY19 Miss Jockey FY20 Soft Wonder
Source: Company, Phillip Capital India Research
Our analysis of women’s innerwear companies We analysed seven unlisted women innerwear companies along with Page Industries: Revenue CAGR for all companies was 14.5% over FY16-20; only Zivame and Amante grew faster than Page Industries in the women’s innerwear vertical on a low base. Gross margins for Triumph and Clovia were higher than Page Industries, as Clovia is a private label online retailer while for Triumph, more than 55% of its revenues come from exports (for its parent company) to other geographies and 90% revenue coming from brasseries. Operating margins were highest for Page Industries, with Triumph having double-digit margins. Bodycare and Enamore’s were 9-10% while Zivame, Amante, and Clovia were loss-making at the operating level. Page Industries has one of the lowest A&P spends at 3-4% of revenues, while online players such as Zivame and Clovia’s A&P spends are 16-17% of revenues. Only BodyCare, Lovable, and Amante had more than 100 days of inventory. The cash-conversion cycles for Amante and Clovia were lower than Page Industries’. Page Industries is superior to most peers across most parameters. However, funding to online players such as Zivame and Clovia and increasing presence of international brands could slow Page’s growth in the long run, if it does not increase its distribution reach into smaller towns and cities.
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Slowly expanding women’s EBOs (numbers) Revenue growth across peers (%)
40 37 Page Enamor Body Care Lovable Zivame Triumph 35 2 Amante Clovia 80 30 9
25 60 9 20 40
15 5 20 10 7 5 0 5 0 -20 FY15 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 Source: Company, MCA,Phillip Capital India Research
Gross margins across unlisted peers (%) Operating margins across unlisted peers (%)
Enamor Body Care Lovable FY16 FY17 FY18 FY19 Zivame Triumph Amante 40 Clovia Pretty Secrets 75 20 0 65 -20 55 -40
45 -60 -80 35 -100 25 -120 -140 15 Enamor Body Lovable Zivame Triumph Amante Clovia FY16 FY17 FY18 FY19 Care Source: Company, MCA,Phillip Capital India Research
A&P spends across unlisted peers Trend in PAT for unlisted peers (Rs mn)
A&P (Rs Mn) % of sales (rhs, %) FY16 FY17 FY18 FY19 250 25 300 200 200 20 100 150 15 0 -100 100 10 -200 -300 50 5 -400 0 0 -500 -600 -700 Enamor Body Lovable Zivame Triumph Amante Clovia Care Source: Company, MCA,Phillip Capital India Research
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Trend in inventory days across unlisted peers Cash conversion days across unlisted peers for FY19
FY16 FY17 FY18 FY19 300 300 250 250 200 200 150 150
100 100
50 50
0 0 Enamor Body Lovable Zivame Triumph Amante Clovia Enamor Body Lovable Zivame Triumph Amante Clovia Care Care
Source: Company, MCA,Phillip Capital India Research
Pricing range for brasseries (t-shirt bras) in Rs Pricing range for women’s bottoms - pack of 3 (Rs) 3000 1400
2500 1200 1000 2000 800 1500 600 1000 400 500 200
0 0
Source: Company, Various company website, Phillip Capital India Research
Funding for Zivame Year Investor Deal Value (USD mn) Sep-12 Chiratae Ventures, Kalaari Capital 3.08 Nov-13 Chiratae Ventures, Kalaari Capital, Unilazer Ventures 5.33 Aug-14 Chiratae Ventures, Kalaari Capital, Unilazer Ventures 4.9 May-15 Chiratae Ventures, Kalaari Capital, Unilazer Ventures, Zodius Technology Fund, Khazanah Nasional Berhad, Avezo Advisors 39.13 Aug-15 Ratan Naval Tata 19.78 Mar-19 Zodius Technology Fund, Allana Investments, Avezo Advisors, Avendus Capital 12.31 Jul-20 Reliance Brands buys Unilazer Ventures stake in company NA Source: VCCedge, Phillip Capital India Research
Funding for Clovia Year Investor Deal Value (USD mn) Oct-12 Mountain Partners AG 1.87 May-15 IvyCap Ventures Trust Fund 2.35 Jul-16 IvyCap Ventures Trust Fund , Singularity Ventures, Mountain Partners AG, Ravindra Dhariwal 1.17 Jan-18 IvyCap Ventures Trust Fund 0.79 Jan-19 AT Capital Pte Ltd., IvyCap Ventures Trust Fund 10 May-19 AT Capital Pte 0.99 Nov-19 IvyCap Ventures Trust Fund , Ravindra Dhariwal 0.82 Source: VCCedge, Phillip Capital India Research
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Profile of women’s innerwear brands Brand Description EBOs Reach Wacoal Founded in 1946 in Japan by Koichi Tsukamoto 21 13 MBOs, 12 cities Opened its first store in India in December 2015 Wacoal India Pvt Ltd is a joint venture between Periwinkle Fashions (Tainwala Group) and Wacoal International Hong Kong Co Ltd. Offers a wide variety of women’s luxury lingerie products such as bras, panties, daywear, and shapewear. V-Star Falls under the umbrella of the V-Guard group. 20 50 distributors,4500 dealers Ventured into innerwear for women, men, and children Has a prominent presence in the south-Indian market Enamor Acquired by Advant International in 2019 for Rs 3.2bn 22 4,500 point of sales, 350+ LFS Premium women’s lingerie brand introduced in 2001 Apart from innerwear, Enamor has also introduced an athleisure line Pretty Secrets Brand owned by India-based MTC ECOM Private Ltd, an e-commerce company NA NA Offers a wide range of products such as women’s innerwear, swimwear and sleepwear Founded in 2012, Pretty Secrets raised funds from Orios Venture Partners and a Singapore-based venture capital fund, RB Investments Amante Part of MAS Brands, a subsidiary of MAS Holdings, South Asia’s largest supplier of 16 2,500 outlets, 200+ LFS intimate wear Launched in India in 2007 Current product lines include bras, panties, nightwear, active wear, and swimwear Groverson Paris Part of the Groverson Group, which has been in the women’s innerwear business 2 15,000 MBO Beauty for about 60 years Current product lines include bras, panties, nightwear, loungewear, and active-wear for women. Zivame Founded in 2011 48 1,000+ outlets Become a major player in the women’s lingerie space Caters to women across various categories such as bras, panties, nightwear, shape- wear, and active-wear 80% revenue from the online channel Clovia India based lingerie brand, founded in 2012 13 100+ SIS Operates under Purple Panda Fashions Private Ltd Offers a wide variety of women’s intimate wear such as innerwear, nightwear and active-wear clothing Predominantly an online player Lovable Now known as Lovable Lingerie Limited NA 3,000+ MBOs only Incorporated in 1987 One of the leading manufacturers of women’s innerwear garments Acquired the brand “Lovable” from Lovable World Trading Company (USA) in late 2000 Products include, innerwear, sportswear, shape-wear and sleepwear Also owns the brand Daisy Dee La Senza Originally a Canadian brand, bought by L Brands (owner of Victoria’s Secret), who 12 7 cities later sold it to a private equity firm Premium women’s lingerie brand Offers intimate wear and sleepwear products Has over 340 stores worldwide, out of which 12 are in India Hunkemoller Dutch brand, founded back in 1886 8 8 cities Grown to over 940 stores in 21 countries Full range of women’s lingerie, sleepwear, swimwear and sportswear products Retail presence in India with 8 EBOs, and through various online marketplaces Naidu Hall Founded in 1939 22 500+ MBOs South Indian brand that has an extensive product range that includes lingerie, blouse, petticoats, active wear and bottom wear Present across online platforms TT Established men’s innerwear brand from 1970 13 30,000+ MBOs Expanded to women and kids innerwear Also offers casual-wear over the last few years M&S Lingerie Leading British clothing brand that ventured into India in 2001 25 NA Lingerie is given 12-15% of total space in flagship stores and accounts for 20%+ revenues Expanded into standalone beauty and lingerie stores Van Heusen ABFRL’s premium lifestyle brand 45 20,000+ MBO presence Innerwear Wide portfolio of products in men’s and women’s innerwear across EBOs, MBOs, LFS, and online Source: Company, Phillip Capital India Research
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Men’s innerwear to grow slightly ahead of industry
Page Industries’ men’s portfolio has grown ahead of industry This has been true for the last decade, given its aspirational positioning in the mid-to- premium category at affordable price points, all the while selling superior quality products. With its strong distribution network and pan-India reach, Page was able to outperform domestic peers that were focussed on entry-level price points, even as international players were not able to find significant shelf space at retail counters. In all this, Jockey’s aggressive advertising, presence across price points, and bold packaging aided its growth.
Faster-than-listed-peers growth led to market-share gains FY11-18 volume CAGR for Jockey’s men’s innerwear category was 11.7%, while realisation per piece CAGR was 9.1%, leading to 21% revenue CAGR. Even in last two years, where growth for Page Industries was in single digits, it still managed to grow faster than listed peers, leading to market-share gains. We believe that the company will be able to sustain this trend, and gain market share from unorganised players, given its presence across price points, new collection launches every year, and strong focus on distribution, despite competition becoming aggressive in the mid-premium category.
Men’s volume and pricing growth (%) Page’s revenue growth is ahead of competition (%)
Realisation Growth Volume growth Page Lux Dollar Rupa 25.0 Amul Dixcy VIP Clo 40
20.0 30
20 15.0 10
10.0 0
-10 5.0 -20
0.0 -30 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY19 FY20 Source: Company, Phillip Capital India Research
Jockey: Entry-level pricing across men’s briefs (Rs) Pricing range for men’s innerwear (Rs) 900 Heritage 800 1876 700 Interntional Collection 600 500 New York City 400 Sports Performance 300 POP 200 100 Elance 0
Zone
UCB
ONN
Levis
M&S
Pepe
XYXX
Zoiro
FCUK One8
USA Original Hanes US US Polo
Modern Classic ForceNXT
Van Heusen Van
Jack & Jones & Jack
Park Avenue Park Chromozome 0 100 200 300 400 Loom the of Fruit Source: Company, Phillip Capital India Research Source: Company, Various websites, Phillip Capital India Research
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A look at the mid-to-premium segment in men’s innerwear As per industry estimates, the men’s mid-to-premium category is growing significantly ahead of economy innerwear. In fact, the super-premium category is likely to double its share in the men’s innerwear category. Jockey has presence across price points here, with its core positioning being in the mid-to-premium segment. It can be seen that with every Rs 30-50 increase in spends per piece by the customer, they can upgrade to superior brands, which would drive growth for Page Industries in the medium to long run, as customer aspiration increases.
Over last two years, competition in the mid-to-premium segment has been rising Van Heusen (ABFRL) launching its innerwear at a 5-10% premium to Jockey, with superior product quality. US Polo (Arvind Fashions), ONN and One8 (Lux Industries), FCUK (Rupa), Pepe Jeans (Dollar Industries) increased their distribution reach, number of SKUs, and began to target Jockey’s customers (same aspirational pool) with aggressive advertising. The biggest challenge these brands are facing is getting their distribution network right, as they need to offer higher trade margins and higher credit days than Jockey, flexible returns policies, and regular investments in products, which would impact their financials. While the premium portfolio of these brands continues to remain small compared to Jockey, they can, over a period, become a threat.
Men’s innerwear segmentation across price points Men’s: Mid-premium category to grow ahead of economy
Economy Mid Premium Super premium
100% 2% 4% 16% 18% 80%
35% 60% 38%
40%
20% 47% 41%
0% 2018 2022e
Source: Redseer Report, Phillip Capital Research
Men’s ad campaigns for innerwear Men’s collection launches over the years Year Mens Innerwear FY10 Sport Performance Zone Stretch FY11 Comfort Plus POP Color FY13 International collection - Modern thermals Sports performance microfiber seamfree FY15 USA Original FY16 International collection FY17 1876 Heritage Collection FY20 New York Collection
Source: Company, Phillip Capital India Research
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Financial comparison of the men’s innerwear brands suggests that Page is superior in most aspects to its peers. Its operating margins, cash-conversion cycle, and FCF/EBIDTA are significantly better, giving it an edge.
Gross margin across peers (%) Operating margin across peers (%)
Page Lux Dollar Rupa Amul Dixcy Page Lux Dollar Rupa Amul Dixcy 67 25
62 20
57 15
52 10
47 5
42 0 FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
Source: Company, MCA, Phillip Capital India Research
A&P spends across peers (Rs mn) Trend in FCF/EBIDTA for peers
A&P Expenses % of sales FY17 FY18 FY19 FY20 2000 16% 1.20
14% 1600 12% 0.80
1200 10% 8% 0.40
800 6%
4% 0.00 400 2%
0 0% -0.40 Page Lux Dollar Rupa Amul Dixcy VIP Clo Page Lux Dollar Rupa Amul Dixcy
Source: Company, MCA,Phillip Capital India Research
Trend in inventory days across unlisted peers Cash conversion days across peers
FY16 FY17 FY18 FY19 FY20 300 250 250 200 200 150 150
100 100
50 50
0 0 Page Lux Dollar Rupa Amul Dixcy VIP Clo Page Lux Dollar Rupa Amul Dixcy VIP Clo
Source: Company, MCA,Phillip Capital India Research
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Jockey kid offers significant long-term opportunity
Remains a focus area for the company Page currently has 28 exclusive Jockey Junior EBOs, of which 23 opened in last six months. Currently, Jockey Junior products are available in 8,000 outlets out Page’s 72,000 outlets. For phase-1 of its expansion plan, Page has appointed distributors for Jockey Junior across top-50 cities, and plans to expand to other cities in phase-2. It has a pan-India independent sales team for this business, with a separate marketing plan to achieve its growth strategy. Its Hassan (Karnataka) plant is adding 90,000 sq. ft. space to expand the kids and women’s segment, which is scheduled to come on stream by Q3FY21. Currently, Jockey Junior accounts for only 2% of Page’s revenues, but it has significant long-term potential, given attractive price points. Kids’ products are priced attractively – t-shirts and tank tops start at Rs 279 while shorts are available from Rs 479.
We believe kids’ wear is a highly unorganised and very price-sensitive segment. The kids-wear market in India is estimated at Rs 819bn with CAGR projections at 8.5% for the next five years based on booming population coupled with factors such as growing number of nuclear families system, which in turn facilitates increased spending on children, greater brand awareness among kids, and better focus on this segment by organized players.
Kids’ apparel market size (Rs bn) Jockey Juniors ad campaigns 1600
1400
1200
1000
800
600
400
200
0 CY2019 CY2025
Source: Company, Phillip Capital India Research
Other businesses are very niche and small Page launched Speedo in 2011 with an exclusive license for manufacturing, distribution, and marketing in India, catering to the niche market of swimwear, equipment, water shorts, etc. Its revenue is now Rs 400mn and the brand is available in 1,350 stores, 43 EBOs, and 15 large-format stores.
Page has a strong presence in socks, and it has recently entered face masks. It has expanded its socks manufacturing facility by adding a 70,000 sq. ft. space in Bangalore. The plant is equipped with evaporative cooling facilities, and has the best Italian socks-knitting machines to manufacture the best-quality products.
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Revenues from Speedo (Rs mn) Reach of Speedo
450 Total Retail reach EBOs (rhs) 1600 50 400 1400 45 350 40 1200 300 35 250 1000 30
200 800 25 20 150 600 15 100 400 10 50 200 5 0 0 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: Company, Phillip Capital India Research
Expanding the socks business Entered into the new face-masks category after Covid-19
Source: Company, Phillip Capital India Research
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Financial analysis Revenue CAGR of 15% over FY22-24 We see revenue CAGR of 15.4% over FY22-24 to Rs 48.8bn, higher than 7.5% CAGR over FY18-20, but lower than FY15-20 at 13.8%. While revenue CAGR is lower than earlier years, Page has not lost market share, given its higher-than-peers revenue growth rate. Revenue decline in FY21 (due to Covid-19) hurt CAGR; in H1FY21, its revenue fell 36% yoy, and it should post growth from H2FY21. We expect revenue to bounce back sharply in FY22 at +32%. Over the next two years, athleisure’s growth will be ahead of industry while the men’s category (c.45% of revenue) will grow in line with industry. In the long run, Page can consistently deliver low-teens revenue growth based on 7-8% growth in pricing and volume.
Revenue to bounce back sharply in FY22 EBIDTA CAGR of 19% over FY22-24
Revenue (Rsmn) Growth (rhs) EBIDTA (Rsmn) Margins (rhs) 60000 35% 12000 24% 30% 50000 10000 22% 25% 20% 40000 20% 8000 15% 18% 30000 6000 10% 16% 20000 5% 4000 14% 0% 10000 2000 -5% 12% 4132 5406 6169 5326 5568 8016 9705 11361 0 -10% 0 10% FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e
Reducing sub-contracting expenses will aid margins Gross margins to remain range-bound
Sub Contract Expenses (Rsmn) % of revenue Gross Margins Gross Margins (inc sub contract exp) 1600 8 65 1400 7
1200 6 60
1000 5 55 800 4
600 3 50 400 2
200 1 45
0 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 40 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e
Source: Company, Phillip Capital India Research
EBIDTA CAGR of 19% over FY22-24 Gross margins: We are building 58% gross margins for FY24, in line with FY19; historical high gross margins were in FY16 at 61.8%. The company seems to take prudent 6-7% price increases every year to mitigate raw-material cost inflation.
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If we include sub-contracting expenses (expenses to convert yarn to fabric by third parties) which is a part of other expenses, gross margins should be at 54.3% in FY24, higher than 53.3% in FY19. Over the last five years, sub-contracting expenses have remained flat at c.Rs 1.2bn and its share has reduced to 4.3% of revenue in FY20 from 6.9% of revenue in FY16, as the company started buying fabric directly, instead of getting it converted from yarn.
A&P expenses and royalty: Page pays 5% royalty on invoice value to Jockey International Inc, in line with its licensing agreement till 2040. This royalty rate has remained constant. A&P expenses have been 3.5-4.5% of revenue over the last six years. However, with scale, A&P spends will moderate marginally to 3.2% of revenue, while at an absolute level they will see a CAGR of 15% over FY22- 24.
Operating leverage to aid margins: With high operating leverage we expect operating margins to expand to 23.3% in FY24, higher than 18.1% in FY20, on a like-to-like basis. Adjusting for Ind-As 116, we have modelled operating margins at 22.1% for FY24, lower than 21.6% for FY19. Hence, EBIDTA CAGR would be 19% over FY22-24 to touch Rs 11.3bn in FY24 compared to Rs 5.3bn in FY20. PAT CAGR should be 19.4% over FY22-24 to touch Rs 7.5bn.
Small part of raw material is imported
Source: Company, Phillip Capital India Research
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A&P spends to remain between 3.5-4.5% of revenues Royalty to remain at c.5%
A&P Spends % of sales 1200 5% 5.8 5.6 1000 4% 5.4
800 5.2 3% 600 5.0 2% 4.8 400 4.6 1% 200 4.4
0 0% 4.2 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: Company, Phillip Capital India Research
Lean balance sheet will help generate steady cash flow We have modelled 89 days of a cash-conversion cycle for Page, as inventory would stabilise at three months, with a further upside when ARS (auto- replenishment system) is implemented across all distributors. Implementation of the supply-chain optimisation tool (Q4FY21) at the back-end would be able to reduce slow-moving inventory in the system to a greater extent. Debtor and creditor days are historically the same, so Page would only need to invest in inventory. The company would continue to remain debt-free; we expect net cash rising to Rs 4bn by FY24 from Rs 0.8bn in FY20. Low working capital and strong operating performance will help the company to generate healthy cashflows with cumulative free-cash flow at Rs 13bn and operating cash flow at Rs 17.6bn over FY22-24. We have modelled cumulative capex of Rs 4.5bn over three years, as the company would start a green field factory in Orissa. Dividend payout should remain at historic levels of 50%; in FY19, it paid a one- time special dividend, taking the payout to 117% including tax. Return ratios should improve significantly from lows of FY20. RoIC will be at historic highs of 50% in FY24 while RoE/RoCE should be at 47%/40%, due to high cash on the books despite high dividend payout.
PAT CAGR of 19% over FY22-24 Cash conversion cycle to remain stable
Adj Net Profit (Rsmn) % Growth (rhs) Debtor Days Inventory Days 8000 60% Creditor Days Cash Conversion Cycle 120 120 7000 50%
6000 40% 100 100
5000 30% 80 80
4000 20% 60 60 3000 10% 40 40 2000 0% 20 20 1000 -10% 0 0 0 -20% FY16 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e
Source: Company, Phillip Capital India Research
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Remain cash-rich despite high capex Return ratios to inch up significantly
Net D/E ex-lease liability (rhs) RoCE RoE RoIC 0.2 60
55
50 0.0 45
40 -0.2 35
30
-0.4 25 FY16 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e 20 FY16 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e
Source: Company, Phillip Capital India Research
FCF generation to remain high (Rs mn) Dividend payout to remain stable
FCF OCF FCF/EBIDTA Dividend/share (Rs) (rhs) Dividend Payout, % (RHS) 8000 0.9 400 140 7000 0.8 350 120 0.7 6000 300 0.6 100 5000 250 0.5 80 4000 0.4 200 3000 60 0.3 150 40 2000 0.2 100 1000 0.1 50 20
0 0.0 0 0 FY16 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e FY16 FY17 FY18 FY19 FY20 FY21e FY22e FY23e FY24e
Source: Company, Phillip Capital India Research
Valuations We expect the company’s growth to surpass the industry’s in the women’s and outerwear category, while in men’s innerwear category, it should be marginally ahead of industry. Strong pricing power and investments in digital/business transformation will help Page to achieve stable margins (of 21-22%) An industry-leading cash-conversion cycle, debt-free balance sheet, and 50% dividend pay-out gives it an edge. We initiate coverage on Page with a BUY rating and a target of Rs 34,250 (55x Sep’23 EPS of Rs 623). We assign a 10% discount to its five-year average and in- line with its eight-year average, given its lower growth in last few years.
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Key Risks
Aggressive investment by private label retailers in the innerwear category Retailers such as Westside, Zudio, Shoppers Stop, Pantaloons, and Nykaa have started aggressive marketing of their private-label innerwear in the last couple of years, at attractive price points. Pantaloons, Shoppers Stop, and Nykaa have launched innerwear in the last one year itself, while we believe innerwear/sleepwear accounts for c.5% of revenue for Westside. While SKU depth for retailers (apart from Westside) is very small compared to Jockey, strong footfalls and loyal customer base of these retailers could impact demand for Jockey in the medium to long term.
Nykaa launches innerwear collection under Nykd brand Zudio gaining traction with aggressive pricing
Source: Company, Phillip Capital India Research
Increasing competitive intensity With a “Direct to Customer” model, it is much easier to launch new brands in the post-Covid era. Higher-than-expected competitive intensity, with increasing funding for start-ups, could hurt growth in athleisure, and the women’s innerwear category. Further, we could see increasing trade commission along with distributor promotion, which could dent margins further.
Reducing RoI for distributors/EBOs Distributors/EBOs franchisee owners of Page Industries have always earned 18%+ RoI. Lower RoI for channel partners would increase churn in the system, and disrupt growth in the medium term.
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Company profile Located in Bangalore, India. Exclusive licensee of JOCKEY International Inc. (USA) for manufacture, distribution and marketing of the JOCKEY® brand in India, Sri Lanka, Bangladesh, Nepal, UAE, Oman and Qatar. Also the exclusive licensee of Speedo International Ltd. for the manufacture, marketing and distribution of the Speedo brand in India. Was set up in 1994 by Genomal family, who have been associated with JOCKEY International Inc. for 50 years, as its sole licensee in the Philippines. The company’s workforce numbered +19,000 people, with manufacturing operations spread over fifteen state-of-the art manufacturing complexes in Bangalore, Hassan, Mysore, Gowribidanur, Tiptur and Tirupur.
Key timelines
Source: Company Key management team Name Age Designation Description At 66 years of age, Mr. Genomal has about three decades of experience in the Mr. Sunder Genomal 66 Managing Director textile industry. He has a M. Tech in Industrial Engineering. He is in charge of the affairs of the company, and has been the Managing Director since 1996. Current CEO. Has Mr. Ticku has been with the company since 1997, and as a CEO, takes care of the Mr. Vedji Ticku 53 resigned with May’21 overall operations. He received the ‘Decadal Award’ on behalf of Page Industries being his last month. Limited at the 10th edition of the CNBC TV18 Emerging India Awards event. Mr. Shamir Genomal, son of Mr. Sunder Genomal, has over a decade of experience Deputy Managing in the textile industry, and is currently involved in operations strategy planning. He Mr. Shamir Genomal 36 Director has been with the company since 2014 and was previously working for Page Garments Exports Pvt. Ltd. Mr. Chandrasekar is a qualified CA and CWA, who has about three decades of Mr. Chandrasekar K 57 Chief Financial Officer experience in finance, taxation and strategic business planning. Previously employed at Dalmia Cement, he has been with the company since 2018. With a diploma in fashion designing, Mrs. Sabera heads product development of Head of Product Mrs. Fatgieya Sabera 51 women’s & girls wear. She has 25 years of experience in product development, and (Womens Wear) previously worked at Aditya Birla Fashion & Retail Ltd. Mrs. Commons has been with the company since 2014, and she heads product Head of Product Mrs. Shelagh M. Commons 48 development of men’s & boys wear. She has about 25 years of experience in (Mens & Boys Wear) designing and development of intimate apparel. Executive Director – Mr. Ganesh has an under-graduate degree in Mathematics and is a qualified Manufacturing and Associated Company Secretary. With over three decades of business operations Mr. Ganesh V S 52 Operations. To be CEO experience is in charge of manufacturing and operations. He previously worked at from June’21 Seeds Intimate Apparels (India) Private Limited. Mr. Sehgal, who recently joined the management team in early 2020, has a BA Economics, an LLB, and a PG in Business Management. He has around two decades President Channel Mr. Gagan Sehgal 42 worth of experience in business operations, and is in charge of channel sales and Sales and Distribution distribution. Over the last few years, he has worked with Moolchand Healthcare, Apollo Hospitals, and Fortis Healthcare. Source: Company, Phillip Capital India Research
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Financials
Income Statement Cash Flow Y/E Mar, Rs mn FY21 FY22E FY23E FY24E Y/E Mar, Rs mn FY21E FY22E FY23E FY24E Net sales 27,303 36,122 41,743 48,238 Pre-tax profit 4,789 7,102 8,637 10,132 Growth, % -5.7 32.3 15.6 15.6 Depreciation 638 767 914 1,066 Other income 439 526 553 580 Chg in working capital 385 -2,048 -1,255 -1,464 Total income 27,742 36,648 42,295 48,818 Total tax paid -1,245 -1,847 -2,246 -2,634 Raw material expenses -12,068 -15,476 -17,775 -20,515 Other operating activities 142 147 155 163 Employee expenses -5,503 -6,219 -6,965 -7,870 Cash flow from operating activities 4,708 4,122 6,205 7,263 Other Operating expenses -4,603 -6,938 -7,850 -9,071 Capital expenditure -900 -1,500 -1,500 -1,500 EBITDA 5,568 8,016 9,705 11,361 Chg in investments 185 213 234 257 Growth, % 4.6 44.0 21.1 17.1 Other investing activities Margin, % 20.1 21.9 22.9 23.3 Cash flow from investing activities -715 -1,287 -1,266 -1,243 Depreciation -638 -767 -914 -1,066 Free cash flow (ex-Lease Liability) 3,808 2,622 4,705 5,763 EBIT 4,931 7,249 8,791 10,295 Equity raised/(repaid) 0 0 0 0 Growth, % 4.6 47.0 21.3 17.1 Debt raised/(repaid) 0 0 0 0 Margin, % 17.8 19.8 20.8 21.1 Dividend (incl. tax) -2,789 -2,789 -3,346 -4,183 Interest paid -327 -359 -388 -420 Other financing activities -327 -359 -388 -420 Other Non-Operating Income 185 213 234 257 Cash flow from financing activities -3,115 -3,148 -3,735 -4,603 Non-recurring Items 0 0 0 0 Net chg in cash 878 -314 1,204 1,417 Pre-tax profit 4,789 7,102 8,637 10,132 Tax provided -1,245 -1,847 -2,246 -2,634 Valuation Ratios Profit after tax 3,544 5,256 6,391 7,498 FY21E FY22E FY23E FY24E Others (Minorities, Associates) Per Share data Net Profit 3,544 5,256 6,391 7,498 EPS (INR) 317.7 471.2 573.0 672.2 Growth, % 3.2 48.3 21.6 17.3 Growth, % 3.2 48.3 21.6 17.3 Net Profit (adjusted) 3,544 5,256 6,391 7,498 Book NAV/share (INR) 802.8 1,024.0 1,296.9 1,594.1 Unadj. shares (m) 11.2 11.2 11.2 11.2 FDEPS (INR) 317.7 471.2 573.0 672.2 CEPS (INR) 374.9 540.0 654.9 767.8 Balance Sheet CFPS (INR) 341.4 235.0 421.8 516.7 Y/E Mar, Rs mn FY21E FY22E FY23E FY24E DPS (INR) 250.0 250.0 300.0 375.0 Cash & bank 2,048 1,734 2,938 4,355 Return ratios Debtors 898 1,188 1,372 1,586 Return on assets (%) 23.6 29.0 29.7 29.7 Inventory 6,732 8,907 10,293 11,894 Return on equity (%) 41.3 51.6 49.4 46.5 Loans & advances 750 787 827 868 Return on capital employed (%) 35.3 41.9 41.1 39.9 Other current assets 1,029 1,081 1,135 1,192 Turnover ratios Total current assets 11,457 13,696 16,564 19,894 Asset turnover (x) 3.6 4.1 3.7 3.7 Investments 0 0 0 0 Sales/Total assets (x) 1.8 2.0 2.0 1.9 Gross fixed assets 6,264 7,764 9,264 10,764 Sales/Net FA (x) 7.8 8.5 8.7 9.2 Less: Depreciation -1,947 -2,714 -3,628 -4,694 Working capital/Sales (x) 0.1 0.2 0.2 0.2 Add: Capital WIP 287 287 287 287 Receivable days 11.8 11.8 11.8 11.9 Net fixed assets 4,605 5,338 5,924 6,358 Inventory days 88.6 88.7 88.8 88.9 Total assets 16,062 19,034 22,488 26,252 Payable days 12.0 12.0 12.0 12.0 Working capital days 53.5 60.9 63.6 66.1 Current liabilities 5,063 5,563 5,967 6,410 Liquidity ratios Provisions 279 284 289 295 Current ratio (x) 2.1 2.3 2.6 3.0 Total current liabilities 5,341 5,847 6,256 6,705 Quick ratio (x) 0.9 0.8 1.0 1.2 Total Debt 1,764 1,764 1,764 1,764 Interest cover (x) 15.1 20.2 22.6 24.5 Deferred Tax Liabilities 2 2 2 2 Dividend cover (x) 1.3 1.9 1.9 1.8 Total liabilities 7,107 7,613 8,022 8,471 Total debt/Equity (%) 0.2 0.2 0.1 0.1 Paid-up capital 112 112 112 112 Net debt/Equity (%) (0.0) 0.0 (0.1) (0.1) Reserves & surplus 8,843 11,310 14,355 17,670 Valuation Shareholders’ equity 8,954 11,421 14,466 17,781 PER (x) 92.5 62.4 51.3 43.7 Total equity & liabilities 16,062 19,034 22,488 26,252 PEG (x) - y-o-y growth 0.3 0.1 0.1 0.1 Source: Company, PhillipCapital India Research Estimates Price/Book (x) 36.6 28.7 22.7 18.4 Yield (%) 0.9 0.9 1.0 1.3 EV/Net sales (x) 11.8 8.9 7.7 6.7 EV/EBITDA (x) 58.8 40.9 33.7 28.6 EV/EBIT (x) 66.4 45.2 37.2 31.6 EV/EBIDTAR (x) 58.8 40.9 33.6 28.6
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Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.
Large cap stocks Rating Criteria Definition BUY >= +10% Target price is equal to or more than 10% of current market price NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10% SELL <= -10% Target price is less than or equal to -10%.
Mid cap and Small cap stocks Rating Criteria Definition BUY >= +15% Target price is equal to or more than 15% of current market price NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15% SELL <= -15% Target price is less than or equal to -15%.
Disclosures and Disclaimers
PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance. This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice. Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
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Sr. no. Particulars Yes/No 1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for No investment banking transaction by PCIL 2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of No the company(ies) covered in the Research report 3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No 4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the No company(ies) covered in the Research report 5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or No brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing. Kindly note that past performance is not necessarily a guide to future performance. For Detailed Disclaimer: Please visit our website www.phillipcapital.in
IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report is a product of PhillipCapital (India) Pvt. Ltd. which is the employer of the research analyst(s) who has prepared the research report. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor. Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 40 Wall Street 59th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through PHILLIPCAP. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.
Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication
Compensation and Investment Banking Activities
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Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months.
Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report. PHILLIPCAP may rely on information barriers, such as “Chinese Walls” to control the flow of information within the areas, units, divisions, groups, or affiliates of PHILLIPCAP. Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States. The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments. Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by PHILLIPCAP with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein. No part of the content of this research report may be copied, forwarded or duplicated in any form or by any means without the prior written consent of PHILLIPCAP and PHILLIPCAP accepts no liability whatsoever for the actions of third parties in this respect.
PhillipCapital (India) Pvt. Ltd. Registered office: 18th floor, Urmi Estate, Ganpatrao Kadam Marg, Lower Parel (West), Mumbai – 400013, India.
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