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Page Industries
urbanization, brand awareness, and rapid retail growth are influencing consumers to Sanjeev Rohra
migrate to premium branded innerwear. With unorganized sector commanding 70% of the +91-22-4097 9844
sanjeev.rohra@edelcap.com
Indian innerwear market, we expect organized players to outpace the industry growth rate.
1 Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Page Industries
Risks
Any delay in planned capacity additions will affect revenues and profitability
Industry Overview
The Indian innerwear industry, currently valued at ~INR 78 bn (INR 60 bn in 2005), contributes ~7%
of the total apparel market in value terms. With an annual growth rate of ~14%, the innerwear
segment has been outstripping the overall apparel industry growth rate by 100-150bps since the
past three years. Within the innerwear segment, branded innerwear has been growing at ~20%
CAGR during the same period.
Of the total apparel industry, innerwear is the only segment wherein the women’s segment
dominates the market with ~63% market share. On the flip side, only 10% of the women’s innerwear
segment is organized, whereas 65% of the men’s innerwear market belongs to the organized sector.
Considering the fact that only one-third of the total innerwear market is organized, coupled with the
retail revolution spreading across the country, there is a huge unorganized market waiting to be
explored.
Source: Company
2
Page Industries
Company Overview
Page Industries (PIL) was incorporated in 1995 with the objective of getting the 130-year-old
international innerwear brand Jockey to India. The company caters to the growing demand for branded
innerwear products in India, Bangladesh, Nepal, and Sri Lanka. Prior to 1995, the promoters had been
associated with Jockey International, US, as their sole licensee in Philippines for 36 years.
In the early 1990s there was no international innerwear brand retailed in India as consumers
perceived innerwear as a low involvement product. Jockey, one of the biggest international innerwear
brands, has been instrumental in revolutionizing the Indian innerwear industry. Since inception, the
company has many firsts to its credit, including innovative box packaging, fabric innovations, and
eye-catching display modules targeted at increasing consumer’s involvement with the purchase.
PIL retails its products in over 14,000 stores across four retail formats viz., large format stores,
hosiery stores, multipurpose stores, and multi-brand outlets with prominent retail fixtures.
Material inspection
Garment packing
PIL is one of the few players in the industry to have an integrated business model right from material
inspection to fabric cutting and garmenting and packaging. Although the company does not process
the yarn in-house, it follows stringent checks at each level of the value chain. It procures and supplies
yarn to its dedicated suppliers for knitting and processing operations. This model helps the company
maintain a strict control on the quality and packaging of its products.
Jockey International, US: Jockey, incorporated in 1876, is a recognized brand in more than 120
countries. Jockey International, US, innovator of the first ‘Y’ fronted brief in 1935, today commands
~35% of the branded innerwear market in the US. Apart from the US and UK, where it has a direct
presence, Jockey follows the franchisee model with 35-40 licensees present across 120 countries.
Tie-up with Jockey International, US: Jockey International, US, operates on the franchisee model,
wherein all its licensees pay 5% of their annual turnover as royalty fees. Being an exclusive licensee
for Jockey International, US, for the regions of India, Bangladesh, Nepal, and Sri Lanka till 2020, PIL
pays 5% of its total turnover as royalty. PIL historically has always exceeded the revenue target set
by its licensor.
3
Page Industries
Business segments
PIL operates through three business verticals; viz. men’s innerwear, women’s innerwear, and leisure
wear.
Leisure Leisure
wear wear
13% 12%
Women's
innerwear
Women's
14%
innerwear
20%
Men's
Men's innerwear
innerwear 68%
73%
Men’s wear: PIL has predominantly been in the men’s segment, which contributed 73.1% of
revenues in FY07, down from 81% in FY04. Products in this segment include inner tees, vests, briefs,
trunks, and thermal wear. Within men’s wear, the premium and super premium segments account
for ~60% of total sales for this segment. This segment witnessed a CAGR of 25.3% during FY04-07.
Although two-thirds of the INR 21.8 bn (as in 2005) men’s innerwear market is organized, we expect
this segment to grow at ~30% over the next two years fuelled by increased purchasing power,
urbanization, and structural changes in the retail sector.
Women’s wear: Of the INR 38.4 bn (as in 2005) women’s domestic innerwear market, branded
products contribute a mere 10% and the remaining 90% belongs to the unorganized sector.
Products in this segment include brasseries, panties, crop tops, sport tops, camisoles, leggings,
spaghetti tops, and thermal wear. For FY04-07, sales from this segment grew rapidly at an annual
rate of 59%. We expect this segment to have a CAGR of ~63% for the next two years. We anticipate
contribution from this segment to increase from 14.4% of total revenue in FY07 to 20.2% in FY09E.
Leisure wear: Contributing 12.5% of revenues in FY07, this division has grown at an annual rate of
34.2% over the past three years. Products include boxers, bermudas, jersey pants, t-shirts, polo
shirts, and socks. Although the innerwear segment contributes a lion’s share of revenues, this
segment enables PIL to offer a complete range of leisure wear products, including innerwear, under
one roof. We expect this segment to grow at ~35% over next few years.
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Page Industries
PIL operates through a network of 144 distributors who supply to over 14,000 retail outlets
across 1,100 cities and towns throughout the country. The retail outlets are spread over the
following retail formats: exclusive stores, multi-brand outlets (MBOs), hosiery stores, and multi-
purpose stores. Baring VIP, which dominates the economy to mid-premium segment, PIL has a
far wider reach than its premium segment competitors such as Hanes, Triumph, and Bodycare.
Probable outsourcing agreement with Jockey, US, could further boost revenues
80
(in MN pieces)
48
32
16
0
FY05 FY06 FY07 FY08E FY09E
Number of pieces sold is a function of the production capacity of the company as well as its
marketing reach and penetration. Hence, although the capacity is more than doubling from
FY07 levels, we have assumed a more realistic sales target of 34 mn pieces and 45 mn pieces
for FY08E and FY09E, respectively.
Unutilized capacities and benefits of mass scale production would give PIL the opportunity to
manufacture and supply to Jockey, US, which currently sources most of its production
requirements from its licensee in China. This could boost our estimated revenues which do not
account for such an outsourcing tie-up.
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Page Industries
Financial Statements
6
Page Industries
Ratios
Year to March FY05 FY06 FY07 FY08E FY09E
ROAE (%) 71.6 119.4 42.4 34.8 35.4
ROACE (%) 36.6 75.0 42.4 39.0 42.4
Inventory days 94 84 100 100 100
Debtor days 24 21 20 20 20
Fixed assets t/o 5.8 6.4 5.3 5.4 5.8
Debt /Equity 2.0 1.1 0.4 0.3 0.2
Valuation parameters
Year to March FY05 FY06 FY07 FY08E FY09E
EPS (INR) 17.4 47.0 15.2 23.9 31.0
Y-o-Y growth (%) (20.6) 169.8 66.3 56.7 30.1
CEPS (INR) 20.4 50.4 16.6 25.5 33.2
P/E (x) 21.3 7.9 24.4 15.6 12.0
Price/BV (x) 13.6 7.2 6.1 4.9 3.8
EV/sales (x) 5.7 4.2 3.0 2.2 1.7
EV/EBITDA (x) 55.9 22.8 15.0 10.0 7.5
7
Page Industries
Technical View
Page Industries: (CMP INR 372)
The stock has more than doubled during last two months and it has rallied with significant expansion in trading
volumes. The stock has corrected almost 20% during last 2 weeks and price has come closer to critical support at
INR 360-350 levels.
It is important to see that stock declined with out any trading volumes which suggest absence of selling presser and
continued interest of long term investors.
We expect consolidation in short term and recommend to use further decline into the support areas as buying
opportunity. Stock has resistance at A: INR 420 B: INR 445.
8
Edelweiss Securities
Page Industries
th
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Email: pcg.research@edelcap.com
RATING INTERPRETATION
Buy Expected to appreciate more than 20% over a 12-month period Accumulate Expected to appreciate up to 20% over a 12-month period
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