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FINANCIAL SUMMARY
Particulars (Rs mn) FY06 FY07E FY08E FY09E
Net Sales 1.012 1529 2217 2845
YoY Gr. (%) 35.6 51.1 45.0 28.3
Operating Profits 188 278 413 561
OPM (%) 18.6 18.2 18.6 19.7
Net Profits 114 176 253 345
Equity Capital (F.V. Rs 10) 2.4 11 11 11
EPS for the period (Rs.) 46.9 15.8 22.7 30.9
PE (x) 7.2 21.4 15.0 11.0
EV/Sales (x) 0.9 2.3 1.6 1.2
EV/EBIDT (x) 5.1 12.4 8.6 6.2
May 03, 2007 Sensex :13934 Nifty : 4117 CMP : 339 Recomm : BUY
1
BACKGROUND PAGE INDUSTRIES LTD.
Current Operations & business model The company is also integrating backward into
PAGE Industries commenced operations in 1995 manufacture of elastics. This would entail a total capex
through a manufacturing unit at Bangalore for of Rs 5.8 mn financed from the IPO proceeds. It is also
manufacturing ‘JOCKEY’, a leading premium men’s setting up a facility for manufacturing socks at a capex
innerwear brand. The company has steadily grown of Rs 11 mn. These two integration projects will help
its presence in the domestic market with marketing improve margins as it will enable PAGE to have greater
assistance from JOCKEY International Inc. control over a significant component of
manufacturing cost.
It’s operations are currently focussed on garmenting
and packaging of JOCKEY products. The process of Future Growth Strategy
knitting and processing is outsourced by the company.
Exclusive brand outlets
It sources yarn, which is the key raw material, and
supplies it to approved fabric manufacturers. The The company intends to set up ‘Exclusive Brand
company works in close association with its vendors Outlets’ (EBO’s) and large format flagship stores.
so as to maintain stringent control over fabric quality. Flagships stores shall occupy around 2,000 sq. ft. and
The manufactured fabric is then converted into shall display the entire range of ‘JOCKEY’ products.
garments at its facility as it endeavours to maintain The company proposes to add two flagship stores
high levels of quality with respect to garmenting, every year over the next three years and intends to
thereby ensuring consistency in the product. acquire properties on long-term lease instead of
Manufacturing capacity outright purchase. Presently, It has 21 EBO’s spanning
Its garmenting capacity stands at 33 mn pieces p.a. all the major Tier-I cities and plans to double this
for innerwear, which is being expanded to 47 mn number. These EBO’s shall be set up by franchisees
pieces p.a. by FY08 and to 74 mn pieces by FY09. The with support in the form of minimum guaranteed sales
capex for the same is estimated at ~Rs 199 mn. from PAGE.
Brand building
JOCKEY’s product portfolio PAGE’s brand strategies are aimed at establishing a
Men Women Leisure Wear lifestyle positioning for all its products. Since its
launch, the company has positioned its products at
Inner Tees Brassieres Bermudas
the premium end and have emerged as a preferred
Vests Panties Boxers
brand in the segment.
Briefs Crop Top Jersey Pants
Trunks Short Top Round neck T-shirts As part of its brand building exercise, it has earmarked
Therwal Wear Camisole Polo shirts Rs 160 mn out of IPO proceeds. This would include
Socks Legging ad spend on television, display modules upgradation
Spaghetti Top
and appointment of brand ambassador for women’s
Thermal Wear
innerwear.
West
Hosiery Stores
South 25%
55%
Large format stores 30%
8%
MPO’s
15% East
14%
EBO’s MBO’s North
4% 18% 31%
2
INDUSTRY PAGE INDUSTRIES LTD.
Currently, the company enjoys preference from Future product launches in innerwear for men
retailers in the form of allotment of strategic locations include the 3D Innovation and International
within stores. Retaining this advantage for its current collection. In women’s innerwear, additional range
and future retail stores remains a vital ingredient in of brassieres and coloured lingerie are proposed to
ensuring future growth prospects. be added. In leisurewear, the company intends to
add nightwear range for men.
Distribution network
JOCKEY has a retail presence in over 14,000 stores Differentiated packaging
across 1,100 cities and towns with a distributor The company also plans to introduce larger pack sizes
strength of 144. The company is looking at containing three or four pieces per pack to be sold in
aggressively increasing this base through hyper markets. This is part of the overall strategy to
appointment of distributors for Tier-II towns. introduce value packs instead of offering products at
The company intends to concentrate on increasing lower prices for hyper markets.
its EBO sales by expanding its franchisee network. Apparel & innerwear industry
New Launches
The Indian apparel market is pegged at Rs ~880 bn
Continuing its trend of launching innovative products and is expected to grow at ~15% CAGR over the next
to widen its product profile, PAGE plans to add newer 3-4 years. The innerwear & nightwear industry
range in the innerwear and leisure wear segments in accounts for ~10% of the apparel industry.
the super premium category.
The intimate wear market in India is estimated at ~Rs.
~88 bn of which, innerwear and lingerie is estimated
to be ~Rs 60 bn.
Industry Overview
Growth in innerwear market was 13.2% in FY04 as
Apparel Market Rs 880 bn
compared to 12.1% in apparels. The upward trend has
continued with a growth of 14.2% in FY05.
Intimate wear (innerwear+nightwear) is largely
Outerwear Intimate wear dominated by women’s wear. However, only 10%
Rs 792.0 bn Rs 88.2 bn women’s intimate wear currently accrues from the
branded segment as compared to 65% for men’s
innerwear. Thus, there exists considerable potential
for converting consumers of unbranded lingerie to
Innerwear Night wear branded ones.
Rs 60.2 bn Rs 28.0 bn
Men’s Innerwear
The men’s innerwear market is estimated at ~21.8 bn
Mens innerwear Womens inner with mid segment to premium segment accounting
(Rs 21.8 bn) Low wear (Rs 38.4 bn) for ~Rs 11.5 bn (50%). The men’s innerwear segment
currently contributes 70% to revenues through its
Economy Basic, Elance & Classic range in the mid-premium,
Zone & Sports Gold collection in the premium segment.
Rs 11.5 bn Middle
(Jockey Growing market
Universe) Rs 4 bn
Premium (Jockey The medium segment grew at 6% in value terms in
Universe) FY05. With the launch of its 3D innovation and
Super International collection, the company is well poised to
Premium cater to the fast growing super-premium segment,
which grew by 40% in the same period.
Source: Images-business of fashion Oct’06. Vol. VII
3
OUR VIEW PAGE INDUSTRIES LTD.
4
F I N A N C I A L S TAT E M E N T S PAGE INDUSTRIES LTD.
Income Statement 2006 2007E 2008E 2009E Cash Flow Statement 2006 2007E 2008E 2009E
Revenues 1,012 1,529 2,217 2,845 PBT & Extraord. items 174 267 383 523
Depreciation 8 12 23 31
Total Expenditure 824 1,251 1,804 2,284
Interest & dividend inc. - (23) (21) (25)
Balance Sheet 2006 2007E 2008E 2009E Key Ratios 2006 2007E 2008E 2009E
Equity Share Capital 24 112 112 112 EBIDTA (%) 18.6 18.2 18.6 19.7
Inventory (days) 77 62 56 57
Fixed Assets 123 195 359 398
Net working capital (days) 73 56 46 46
Net current assets 139 300 277 367
EV/Sales (x) 0.9 2.3 1.6 1.2
Investments 7 415 395 498
EV/EBIDT (x) 5.1 12.4 8.6 6.2
Miscellaneous Expenditure not w/off 0 67 123 161 P/E (x) 7.2 21.4 15.0 11.0
Total Assets 269 977 1,155 1,423 P/BV (x) 6.6 5.1 4.2 3.3
5
Team
Equity Desk
R. Baskar Babu - Head - Equity Broking baskarb@pinc.co.in 91-22-66186400
Sachin Kasera - Co-Head - Domestic Equities sachink@pinc.co.in 91-22-66186384
Research
Sameer Ranade - Capital Goods / Utilities sameerr@pinc.co.in 91-22-66186381
Nirjhar Handa - FMCG / Pharma / Paints nirjharh@pinc.co.in 91-22-66186400
Sujit Jain - Real Estate / Construction sujitj@pinc.co.in 91-22-66186379
Amol Rao - Hospitality / Pipes / Packaging amolr@pinc.co.in 91-22-66186378
Nirav Shah - Sugar / Textiles niravs@pinc.co.in 91-22-66186383
Nakul Dharmawat - Cement / Building Products nakuld@pinc.co.in 91-22-66186382
Rishabh Bagaria - Auto / Auto Ancilliary rishabhb@pinc.co.in 91-22-66186391
Ruchir Desai - Technology ruchird@pinc.co.in 91-22-66186372
Syed Sagheer - Logistics / Light Engineering syeds@pinc.co.in 91-22-66186390
Chandana Jha - Banking / Financial Services chandanaj@pinc.co.in 91-22-66186398
Rahhul Aggarwal - Metals-Large Cap rahhula@pinc.co.in 91-22-66186388
Dipti Solanki - Media diptis@pinc.co.in 91-22-66186392
Faisal Memon - Associate - Metals-Small & Mid Caps faisalm@pinc.co.in 91-22-66186389
Ashish Dangi - Associate - Lifestyle / Retails Products ashishd@pinc.co.in 91-22-66186481
Ashwani Agarwalla - Associate - Agro Products / Fertilizers ashwania@pinc.co.in 91-22-66186482
Abhishek Gangwani - Associate - Electronics / Hardware abhishekg@pinc.co.in 91-22-66186385
Institutional Sales:
Jaykrishna Gandhi jaykrishnag@pinc.co.in 91-22-66186327
Rajesh Khanna rajeshk@pinc.co.in 91-22-66186328
Dealing
Bhavik Broker / Chetan Trivedi equity@pinc.co.in 91-22-66186306
Manoj Parmar / Raju Bhavsar equity@pinc.co.in 91-22-66186323
Derivative Desk
Sailav Kaji - Strategy sailavk@pinc.co.in 91-22-66186341
Anand Kuchelan - Analyst anandk@pinc.co.in 91-22-66186349
Nilesh G. Inamdar - Dealer nileshi@pinc.co.in 91-22-66186347
PMS Desk
Vivek Agrawal viveka@pinc.co.in 91-22-66186373
Hormasd Sumariwalla hormasds@pinc.co.in 91-22-66186389
Directors
Gaurang Gandhi gaurangg@pinc.co.in 91-22-66186400
Girish Bakre girishb@pinc.co.in 91-22-66186400
Hemang Gandhi hemangg@pinc.co.in 91-22-66186400
Ketan Gandhi ketang@pinc.co.in 91-22-66186400
Rakesh Bhatia - Head Compliance rakeshb@pinc.co.in 91-22-66186400
6
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