Page Industries Sector: Apparels /Mid-Cap Earnings Update – 4QFY13 May 31, 2013 Sensex Nifty Price: INR 4256 Target Price: INR 3878 MARKETPERFORMER 19,760 5,986 Background : Page Industries is the exclusive licensee of Jockey International Inc (USA) to manufacture and distribute Jockey brand in India, Sri Lanka, Nepal, Bangladesh and UAE till 2030. They broadly operate in premium men’s innerwear; women’s innerwear and leisure wear segments. Jockey enjoys high brand recall and they spend ~5% of their annual sales for brand building and promotional activity, which enables them to dominate most of the segments in which they operate. In the men’s and women’s segment, they have a market share of ~21% and ~12% respectively. They are also exclusive licensee of Speedo swimwear brand in India. Page has network of 450 distributors and ~23,000 retail outlets in India. They compete with major brands like Crusoe, Hanes, Lovable and Enamor. 52 Week High/Low INR 4,440/2,776 Strong numbers Bloomberg / Reuters PAG IN/PAGE.BO Revenue up by 35. 5% YoY and -3.3% QoQ at INR 2,090.6 mn Equity (shares in mn) 11.15 Volumes grew by 16% YoY and blended realization grew by 18.2% YoY Mkt. Cap in mn INR 47,820/ $ 846.2 EBITDA at INR 367.3mn up 51.9% YoY; PAT grew by 38.4% YoY to INR 236mn Avg. Daily Vol. (‘000) 6. 01 EBITDA Margin stood at 17.6% in 4QFY13 Avg. Daily Vol. (mn) INR 25 .8 /$ 0.46 Company announced final dividend of INR 14 per share (FY13) and an interim dividend of INR 14 Shareholding Mar 12 Dec 12 Mar 13 Dec 11 perSep share 12 (FY14). Promoters (%) 59.54 57.73 57.48 59.70 16.04 Revenue growth was aided by healthy volume growth and realization improvement FII (%) 15.77 20.14 19.15 14.87 39.42 Sales grew by 35.5% YoY to INR 2,090.6mn aided by healthy volume growth of 16% YoY (excl. volumes from DII (%) 18.62 15.08 15.70 19.40 18.32 factory seconds) and blended realization improvement of 18.2% YoY. In the month of November 2012, Others (%) 6.07 7.05 7.67 6.03 26.22 company has increased the prices across the segment, which was fully reflected in the 4QFY13. On a Pledge (% of 0.00 0.00 0.00 0.00 0.00 promoter holding) sequential basis, men’s wear realization grew by 4.8%, women’s (including brassier: +8.9%), Leisure wear (- 2.8%) and Speedo (+12.5%). EBITDA margin expanded by 190bps YoY and 60bps QoQ to 17.6%; the Valuation Summary (INR bn) margin expansion was aided by strict cost control measures. Employee cost (% of sales) fell by 70 bps YoY Y/E March 2013 2014E 2015E and other operating expenditure fell by 210bps YoY. Revenue 8.6 10.5 13.3 Leisure wear and women’s segment driving the volume growth EBITDA 1.6 2.0 2.6 Volume growth was largely aided by robust growth in leisure wear (+29.7% YoY) and women’s segment Adj PAT 1.1 1.3 1.7 (+28.6% YoY). The volume growth in men’s segment was relatively subdued at +7.1% YoY. The volume Adj EPS* 100.9 119.6 149.1 share from men’s segment dropped from 64.9% in 4QFY12 to 60% in 4QFY13, while the volume share from % growth 25.1 18.6 24.7 women’s segment and leisure wear segment increased from 18.1% and 16.9% in 4QFY12 to 20.1% and 20% PE 42.2 35.6 28.5 in 4QFY13 respectively. P/ BV 22.2 17.6 14.0 EV/EBITDA 29.4 23.4 18.0 EV/Sales 5.6 4.5 3.5 Valuation: Div Yield (%) 1.2 1.4 1.7 At CMP the stock trades at 35.6X and 28.5X to FY14E & 15E earnings respectively. We are bullish on the ROE (%) 59.3 55.3 54.7 long-term performance of the company, however the stock has run up sharply (~30%) since our previous update and we feel that the near term positives has been priced in. We like the stock, but it is likely to be a Net Debt/Equity 0.4 -0.2 -0.3 *Consolidated earnings market performer in the short term. We rate Page Industries a MARKETPERFORMER with a target price of INR. 3,878. We assign a multiple of 26X FY15E EPS. Performance % 1M 3M 12M Page Industries 18.47 29.31 43.26 Risks: Company’s inability to pass on the cost increases on a timely basis, leading to crunch in margin. Sensex 3.65 7.18 23.93 Consumer’s down trading due to uncertainty in the economy & job environment. 4,500 140 Results Summary 4QFY13 4,000 120 3,500 Y/E March ( INR mn) 4QFY13 4QFY12 YoY Growth 3QFY13 QoQ Growth 100 3,000 Revenue 2090.6 1542.9 35.5% 2161.7 -3.3% 2,500 80 EBITDA 367.3 241.9 51.9% 367.3 0.0% 2,000 60 Depreciation 31.0 27.2 14.3% 28.7 8.1% 1,500 Other Income 36.6 42.8 -14.3% 53.3 -31.2% 40 1,000 PBT 343.3 241.8 42.0% 375.2 -8.5% 20 500 Tax 107.3 71.3 50.5% 121.0 -11.3% 0 0 PAT 236.0 170.5 38.4% 254.2 -7.2% Adjusted PAT* 236.0 170.5 38.4% 254.2 -7.2% 12 12 12 13 12 12 12 12 12 13 13 13 - - - - - - - - - - - - Jul Jan Oct Jun Apr Mar Dec Sep Aug Nov May May Page Indus Relative Sensex (RHS) EBITDA Margin 17.6% 15.7% 17.0% Tax Incidence 31.3% 29.5% 32.2% Adj PAT Margin 11.3% 11.1% 11.8% Sathyanarayanan M +91-44-30007361 * Adjusted for forex loss / gain [email protected] Cholamandalam Securities Limited Member: BSE,NSE,MSE Regd. Office: Dare House,2 (Old) # 234) N.S.C Bose Road, Chennai – 600 001. Website : www.cholawealthdirect.com Email id – [email protected] Chola Securities is a leading southern India based Stock broker. Our focus area of coverage within the Indian market is Mid and small caps with a focus on companies from southern India. Our Institutional Equities services are carried out in partnership with RCCR, a boutique Investment research and Corporate Advisory firm founded by a team with extensive experience in the Asset management industry. RESEARCH Singaravelu K P Head of Research +91-44 - 4505 6003 [email protected] Alagappan Ar Financial Services +91-44 - 3000 7363 [email protected] Sathyanarayanan M Consumption +91-44 - 3000 7361 [email protected] Vinayakam P Engineering +91-44 - 3000 7360 [email protected] Michel Charles C Technicals +91-44 - 3000 7353 [email protected] Rajasekhar R IT & Auto Ancillary +91-44 - 3000 7266 [email protected] Sreedevi K Associate +91-44 - 3000 7266 [email protected] INSTITUTIONAL SALES Venkat Chidambaram Head of FII Business & Corporate Finance +91-44 - 24473310 [email protected] Lakshmanan T S P Chennai +91 - 9840019701 [email protected] Santosh Kumar Sharma Mumbai +022 - 22617210 [email protected] RETAIL SALES Chetan Dilipkumar Daxini AHMEDABAD 079 - 64500318 / 19 [email protected] Sathyanarayana N BANGLORE 080 - 41503340 / 44 [email protected] Muthiah A N CHENNAI - HO 044 – 3000 7371 [email protected] Baskaran S CHENNAI - Annanagar 044 - 26208911 / 14 [email protected] Sridharan P S CHENNAI - Adyar 044 - 2452 2111 / 2333 [email protected] Chandrasekar K COIMBATORE 0422 - 4292041 / 4204620 [email protected] Maneesh Gupta DELHI 011 - 30461161 / 62 / 63 [email protected] Murthy A S L N HYDERABAD 040 - 23316567 / 68 [email protected] Shibarjun Mukherjee KOLKATA 033 - 44103638 / 39 [email protected] Sheetal Bheda MUMBAI 022 - 22617210 / 7203 [email protected] Gowthaman G MADURAI 0452 - 2601195 / 96 [email protected] Deepak V Kshirsagar PUNE 020 - 30225432 / 33 /34 [email protected] Gangadhar M VIZAG 0891 - 6642718 [email protected] Chetan Dilipkumar Daxini Balaji H Compliance +91-44 - 3000 7370 [email protected] DISCLAIMER: This report is for private circulation and for the personal information of the authorized recipient only, and we are not soliciting any action based upon it. 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