InstitutionalEquities

IndiaResearch

Textile&Apparel

June04,2013

PageIndustries
Bloomberg:PAGIN
Reuters:PAGE.BO

QUARTERLYREVIEW

BUY

Highonquality;highongrowthUpgradetoBUY

Page Industries (PI) high earnings growth is supported by leisure wear

segmentsFY1315EEPSCAGRof29.3%.With~200bpsbetterprofitability
over other products the segment would add incrementally to already
superior ROE & ROCE vs midtier consumer discretionary. We upgrade
our recommendation to BUY and revise our target price to Rs. 5,097,
valuingat30xFY15EearningswithPEGof1x.
Resultoutshinesexpectations:PageIndustriessalesgrew35.5%YoYtoRs.
2,091 mn (our expectations Rs. 1,902 mn) during Q4FY13. Whilst volume
growthforthequarterwas15%,realizationgrowthofapprox.15%atRs.108.
EBITDAgrew32.5%YoYtoRs.367mn(ourexpectationsRs.287mn)during
Q4FY13 on higher realizations. EBITDA margin for the quarter expanded
189bpsto17.6%.NetincomeforQ4FY13grew38.4%YoYtoRs.236mn(our
expectationsRs.193mn)withNetmarginimprovementof24bpsYoY.
StrongBalancesheet:PIhasastrongbalancesheetwithlowgearingratioof
0.5x, low working capital requirement provides comfort on consistent high
dividend payout of ~50%. Strong demand traction, superior return ratios &
freecashflowsgenerationpositionPIasaqualityinvestmentamongstpeers.

Recommendation
CMP:

Rs5,097

PreviousTargetPrice

Rs3,861

Upside(%)

MarketCap.(Rsbn/US$mn)

NetSales
EBITDA
EBITDAmargin(%)
PAT(Rs)
EPS(Rs)
YoYgrowth(%)
RoE(%)
RoCE(%)
P/E(x)
P/Sales(x)
EV/EBITDA(x)

47/829

52weekHigh/Low(Rs)

4,440/2,680

3mADV(Rsmn/US$mn)

21/0.4

Beta

0.5

Sensex/Nifty

19,610/5,939

Shareoutstanding(mn)

11

StockPerformance(%)

Absolute

1M
11.3

3M
26.3

12M YTD
38.9 23.2

Rel.toSensex

11.2

21.8

13.1

FY2011

FY2012

FY2013

FY2014E

FY2015E

4,916
904
18.4
585
52.5
47.8
52.6
27.0
80.4
9.6
53.3

6,834
1,330
19.5
900
80.7
53.7
62.1
32.7
52.3
6.9
36.0

8,635
1,642
19.0
1,125
100.9
25.1
59.3
34.6
41.8
5.4
29.3

10,813
2,136
19.8
1,449
129.9
28.7
59.4
35.3
32.5
4.4
22.6

13,704
2,775
20.3
1,895
169.9
30.8
59.8
37.5
24.8
3.4
17.5

Source:Company,KarvyInstitutionalResearch

22.0

Performance
4,700
4,200
3,700
3,200
2,700
2,200
1,700

21,500
19,500
17,500

Jun12
Jul12
Aug12
Oct12
Nov12
Dec12
Jan13
Mar13
Apr13
May13

15,500

Sensex(LHS)

PageIndustries

Source:Bloomberg

EarningRevision
(%)

FY14E

FY15E

Revenue

2.9

4.6

EBITDA

4.2

7.2

EPS

3.3

5.6

Source:KarvyInstitutionalResearch

KeyFinancials
Y/EMar(Rs.mn)

21%

StockInformation

Well Positioned in High Growth Segments: PI caters to premium & semi

premium innerwears with an approx. market share of over 21% & 12% in
men & women category respectively. These segments of the market are
expectedtogrowat~2530%overFY1315E.WeexpectPItoleadthisgrowth
with its strong brand recognition, innovative product placement and wide
distributionreachofover23,000retailoutlets&100EBOs.
Outlook&Valuation:Overpast3MPIhasoutperformedBSE500by24%on
back of expectations of above average FY13FY15E EPS CAGR of 30%,
superiorRoE&RoCE,strongbalancesheetandrobustsegmentaldemand.In
thishighgrowthphaseweexpectPItotradeatpremiumvaluationmultiple
inlinewithotherconsumerdiscretionaryandcapturethisonPEGof1x.At
CMP of Rs. 4,218, the stock trades at 24.8x FY15E EPS. We upgrade our
recommendation to BUY with revised target price of Rs. 5,097 per share
valuingPIat30xFY15EEPS(PEGof1x),withanupsidepotentialof21%.

Rs4,218

TargetPrice:

AnalystsContact
RahulSingh
+914044857911
rahulsingh@karvy.com

June04,2013

PageIndustries

Resultoutshinesexpectations
PageIndustriessalesgrew35.5%YoYtoRs.2,091mn(ourexpectationsRs.1,902
mn) during Q4FY13. Whilst volume growth for the quarter was 15%, realization
growth of approx. 15% at Rs.108. EBITDA grew 32.5% YoY to Rs. 367 mn (our
expectations Rs. 287mn) during Q4FY13 on higher realizations. EBITDA margin
forthequarterexpanded189bpsto17.6%.NetincomeforQ4FY13grew38.4%YoY
to Rs. 236 mn (our expectationsRs.193 mn) with net margin improvement of 24
bpsYoY.
ForFY13,sales,EBITDA&netincomegrew26.3%,23.4%&25.1%toRs.8,635mn,
1,642mn & Rs. 1,125mn respectively. Volume & realization grew at 17% & 8% to
87.3mnpcs(ourexpectations88.6mnpcs)&Rs.98.8(ourexpectationsRs.95.3)a
piecerespectively.
Exhibit1: QuarterlyPerformance
(RsMn)

Q4FY12

Q3FY13

Q4FY13

QoQ(%)

YoY(%)

Revenues

1,543

2,162

2,091

(3.3)

35.5

OperatingCosts

1,301

1,794

1,723

(4.0)

32.5

EBIDTA

242

367

367

0.0

51.9

EBIDTAMargin(%)

15.7

17.0

17.6

58bps

189bps

OtherIncome

43

53

37

(31.2)

(14.3)

Interest

16

17

30

78.4

89.0

Depreciation

27

29

31

8.1

14.3

242

375

343

(8.5)

42.0

71

121

107

(11.3)

50.5

TaxRate(%)

29.5

32.2

31.3

Rep.PAT

170

254

236

(7.2)

38.4

ProfitBeforeTax
Tax

Source:Company,KarvyInstitutionalResearch

Exhibit2: Revenue&Volumebreakup
Revenue(Rs.mn)
MenInnerwear
WomenInnerwear

Q4FY13

FY13

FY13Share(%)

1,014

4,637

53.8%

MenInnerwear

276

1,122

13.0%

WomenInnerwear

BRA

135

542

6.3%

LeisureWear

561

2,162

25.1%

92

160

1.9%

Speedo

Volume(MnPcs)

Q4FY13

FY13

FY13Share(%)

11.5

55.8

63.9%

3.2

14.1

16.1%

BRA

0.7

2.8

3.2%

LeisureWear

3.6

14.3

16.4%

Speedo

0.2

0.4

0.4%

Source:Company,KarvyInstitutionalResearch

SegmentwiseRevenueAnalysis:Leisurewear,secondlargestsegmentis
growinghighest,drivingaveragerealizationsandprofitability
Men innerwear, Brasseries, Women innerwear & Leisure wear sales grew 20.3%,
54.2% 51.4%, & 39.6% respectively. In volume terms, the reported growth was
7.1%,44.5%,25.5%&29.7%respectively.Onannualbasis,salesgrew17.4%,40.2%
33.3% & 32.8% respectively while volume growth was 12.7%, 40.0%, 19.5% &
26.3%respectively.

June04,2013

PageIndustries
Exhibit3: VariancefromOurEarlierEstimates
(RsMn)

PreviousEstimates

CurrentEstimates

Variance(%)

Parameter

FY14E

FY15E

FY14E

FY15E

FY14E

FY15E

Revenue

10,507

13,104

10,813

13,704

2.9

4.6

EBITDA

2,049

2,588

2,136

2,775

4.2

7.2

NetIncome

1,403

1,794

1,449

1,895

3.3

5.6

EPS

126

161

130

170

3.3

5.6

ROCE(%)

35.9

37.7

35.3

37.5

(1.8)

(0.3)

ROE(%)

57.8

54.8

59.4

59.8

2.9

9.1

Source:Company,KarvyInstitutionalResearch

According to our interaction with PIs management, realization hike would be

decidedinH2FY14asthereisanimmediatecushionofaround56%intheformof
excisedutyremovaltotakeonanyescalationininputcosts.Weexpectvolume&
valueCAGRof18.8%&26.1%overFY1315E.
Webelievewithstrongbrandpositioningandsuccessfulpricehikesinthepast,PI
enjoys strong market position. It has successfully passed on ~20% price hike in
FY12 on higher input costs without rolling back as industry did with cooling
material prices. Moreover, its second largest segment Leisure wear is growing
fast, where average realizations are high with better profitability, thus driving
blendedrealizationsup.

ComparativeValuationinConsumerDiscretionarySpace
Exhibit4: ComparativeValuation:ConsumerDiscretionaryPlayers(PartI)
Company

Mkt.Cap
(US$mn)

FY13

EPS
FY14E

FY15E

FY13

PE(x)
SalesCAGR EPSCAGR
FY14E FY15E FY1315(%) FY1315(%)

EBITDACAGR
FY1315(%)

INDIA
829.4

100.9

129.9

169.9

41.8

32.5

24.8

26.0

29.8

AsianPaints

7,993.0

141.5

169.1

196.5

33.3

27.9

24.0

16.1

17.8

17.8

JubilantFoodworks

1,311.3

27.0

37.4

49.2

42.1

30.4

23.1

32.5

34.9

33.9

TitanIndustries

4,510.1

9.9

12.2

15.3

29.2

23.6

18.8

22.7

24.7

25.8

36.6

28.6

22.7

24.3

26.8

26.9

PageIndustries

Average

30.0

Exhibit5: ComparativeValuation:ConsumerDiscretionaryPlayers(PartII)
FY13

P/BV(x)
FY14E

FY15E

FY13

22.0

17.2

13.1

29.3

EV/EBITDA(x)
FY14E
FY15E

FY13

RoE(%)
FY14E

FY15E

59.3

59.4

59.8

INDIA
PageIndustries

22.6

17.5

AsianPaints

11.0

9.1

8.5

21.8

18.1

15.4

35.8

35.3

39.0

JubilantFoodworks

12.5

9.3

7.3

22.5

16.7

12.5

34.8

33.4

34.4

TitanIndustries

9.9

7.7

6.0

19.8

16.1

12.5

38.9

36.9

35.9

Average

13.9

10.8

8.7

23.4

18.4

14.5

42.2

41.3

42.3

Source:Company,Bloomberg,KarvyInstitutionalResearch

Webelieve,Pageisevenlyplacedinahighgrowthconsumerdiscretionaryspace,
withleadingbrandpositioninitssegment,deliveringconsistenthighperformance
andgrowthamidchallengingconsumersentimentsduringFY2013.

June04,2013

PageIndustries

Financials
Exhibit6: Profit&lossstatement
Y/EMar(Rs.mn)
Netrevenues
%Growth
RawMaterial
Staff
OperatingExpenses
Operatingexpenses
EBIDTA
%Growth
EBIDTAmargin(%)
Otherincome
Interest
Depreciation
ProfitBeforeTax
Provisionfortax
Effectivetaxrate(%)
AdjustedNetProfit
%Growth
ReportedNetProfit

FY11
4,916
44.8
2,409
897
706
4,012
904
37.6
18.4
121
52
98
878
292
33.4
585
47.8
585

FY12
6,834
39.0
3,296
1,138
1,070
5,504
1,330
47.2
19.5
184
67
106
1,341
441
32.9
900
53.7
900

FY13
8,635
26.3
4,203
1,436
1,353
6,992
1,642
23.4
19.0
208
80
114
1,657
531
32.1
1,125
25.1
1,125

FY14E
10,813
25.2
5,217
1,784
1,676
8,677
2,136
30.0
19.8
270
96
148
2,162
714
33.0
1,449
28.7
1,449

FY15E
13,704
26.7
6,509
2,261
2,158
10,929
2,775
29.9
20.3
343
105
184
2,828
933
33.0
1,895
30.8
1,895

FY14E
112
2,627
2,739
669
683
1,352
57
4,148
2,408
689
1,718
27
193
10
2,919
757
44
3,893
600
1,082
1,682
2,211
4,148

FY15E
112
3,482
3,594
719
733
1,452
57
5,103
2,858
874
1,984
27
193
10
3,700
1,028
44
5,022
790
1,333
2,122
2,900
5,103

Source:Company,KarvyInstitutionalResearch

Exhibit7: BalanceSheet
Y/EMar(Rs.mn)
Equitycapital
Reserves&surplus
Shareholdersfunds
ShorttermLoans
LongTermLoans
TotalLoans
Deferredtaxliability
TotalLiabilitiesandEquity
Grossblock
Depreciation
Netblock
CapitalWIP
OtherNoncurrentAssets
Investments
Inventory
Debtors
Cash&BankBalance
CurrentAssets
SundryCreditors
Othercurrentliabilities
CurrentLiabilities
Netcurrentassets
TotalAssets

FY11
112
1,126
1,238
745
405
1,150
26
2,414
1,259
328
931
74

30
1,647
258
26
2,384
316
660
976
1,409
2,414

FY12
112
1,546
1,658
422
497
919
36
2,613
1,504
428
1,076
27
280
18
1,726
437
31
2,333
373
729
1,102
1,231
2,613

FY13
112
2,024
2,135
589
613
1,202
57
3,394
1,938
542
1,396
27
193
10
2,350
581
46
3,102
473
850
1,323
1,779
3,394

Source:Company,KarvyInstitutionalResearch

June04,2013

PageIndustries
Exhibit8: CashFlowStatement
Y/EMar(Rs.mn)
EBIT
(Inc.)/Decinworkingcapital
Cashflowfromoperations
Otherincome
Depreciation
Interestpaid()
Taxpaid()
Dividendspaid()
DeferredTaxLiability
Netcashfromoperations
Capitalexpenditure()
Netcashaftercapex
Inc./(Dec.)inshorttermborrowing
Inc./(dec.)inlongtermborrowing
Inc./(dec.)inborrowings
(Inc.)/Dec.ininvestments
CashfromFinancialActivities
Others
Openingcash
Closingcash
Changeincash

FY12
1,224
172
1,396
184
106
(67)
(441)
(481)
10
707
(197)
510
(323)
92
(231)
12
(219)
(285)
26
31
5

FY13E
1,529
(542)
986
208
114
(80)
(531)
(650)
22
68
(434)
(366)
166
116
283
8
291
89
31
46
14

FY14E
1,988
(433)
1,555
270
148
(96)
(714)
(845)

319
(470)
(151)
80
70
150

150

46
44
(1)

FY15E
2,591
(689)
1,902
343
184
(105)
(933)
(1,040)

350
(450)
(100)
50
50
100

100

44
44
0

FY11

FY12

FY13

FY14E

FY15E

RawMaterialCost/Sales(%)

49.0

48.2

48.7

48.3

47.5

ManpowerCost/Sales(%)

18.2

16.7

16.6

16.5

16.5

Operating&Othercost/Sales(%)

14.4

15.7

15.7

15.5

15.8

RevenueGrowth(%)

44.8

39.0

26.3

25.2

26.7

EBIDTAMargins(%)

18.4

19.5

19.0

19.8

20.3

NetIncomeMargins(%)

11.9

13.2

13.0

13.4

13.8

ROCE(%)

27.0

32.7

34.6

35.3

37.5

ROE(%)

52.6

62.1

59.3

59.4

59.8

FY11
806
(679)
126
121
98
(52)
(292)
(338)
6
(331)
(271)
(602)
385
218
603

603
(4)
30
26
(4)

Source:Company,KarvyInstitutionalResearch

Exhibit9: KeyRatios
Y/EMar(Rs.mn)

Source:Company,KarvyInstitutionalResearch

Exhibit10: ValuationParameters
Y/EMar(Rs.mn)

FY11

FY12

FY13

FY14E

FY15E

EPS(Rs)

52.5

80.7

100.9

129.9

169.9

P/E(x)

80.4

52.3

41.8

32.5

24.8

BV(Rs)

111.0

148.6

191.4

245.6

322.2

P/BV(x)

38.0

28.4

22.0

17.2

13.1

EV/EBIDTA(x)

53.3

36.0

29.3

22.6

17.5

Fixedassetsturnoverratio(x)

5.8

6.8

7.0

6.9

7.4

Debt/Equity(x)

0.9

0.5

0.5

0.5

0.4

EV/Sales(x)

9.8

7.0

5.6

4.5

3.5

Source:Company,KarvyInstitutionalResearch

InstitutionalEquitiesTeam
RangachariMuralikrishnan

HeadInstitutionalEquities /
Research/Strategy

+912261844301

muralikrishnan@karvy.com

K.AnantRao

HeadSalesTrading&Derivatives

+912261844303

k.anantrao@karvy.com

UdayRaval

KarvyInc.USA

+12122674334

udayr@karvy.com

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Analysts

Industry/Sector

DeskPhone

EmailID

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ResearchAssociatePharmaceuticals

+912261844325

amey.chalke@karvy.com

Banking

+912261844329

hatim.broachwala@karvy.com

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Economist

+912261844320

kruti.shah@karvy.com

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DerivativesandQuantAnalyst

+912261844327

manojkumar.m@karvy.com

MarutiKadam

ResearchAssociate

+912261844326

maruti.kadam@karvy.com

MitulShah

Automobiles

+912261844312

mitul.shah@karvy.com

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BFSI

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paresh.jain@karvy.com

ParikshitKandpal

Infra/RealEstate/Strategy

+912261844311

parikshit.kandpal@karvy.com

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Pharmaceuticals

+912261844310

rahul.sharma@karvy.com

HatimBroachwala,CFA

RahulSingh

MidCap

+914044857911

rahulsingh@karvy.com

RajeshKumarRavi

Cement&Logistics

+912261844313

rajesh.ravi@karvy.com

RupeshSankhe

Power/CapitalGoods

+912261844315

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Media&Entertainment

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ResearchAssociate

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Oil&Gas

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Sales

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Sales

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StockRatings
Buy
Hold
Sell

:
:
:

AbsoluteReturns
>15%
515%
<5%

Forfurtherenquiriespleasecontact:

research@karvy.com
Tel:+912261844300

DisclosuresAppendix

Analystcertification
The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed herein
accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their)
compensationwas,isorwillbedirectlyorindirectlyrelatedtothespecificrecommendation(s)orviewscontainedinthis
researchreport.
Disclaimer
The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information
containedhereinisbasedonouranalysisanduponsourcesthatweconsiderreliable.We,however,donotvouchforthe
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incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors.
Investorsmustmaketheirowninvestmentdecisionsbasedontheirspecificinvestmentobjectivesandfinancialpositionand
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companiesofKarvyacceptsanyliabilityarisingfromtheuseofthisinformationandviewsmentionedinthisdocument.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above
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InstitutionalEquities
OfficeNo.702,7thFloor,HallmarkBusinessPlaza,Opp.GurunanakHospital,Mumbai400051
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