PAGE INDUSTRIES LTD.

Q2 FY 2008 update BUY

RESEARCH Sector Retail I CMP Rs 440 I Target Rs 510

KEY HIGHLIGHTS
STOCK DATA
PAGE Industries Ltd’s (PAGE) Q2FY08 results were in line with
Market Cap Rs4.3bn.
our expectations as the company posted 36% growth in
Book Value per share Rs61 revenues to Rs481mn. Growth across product categories, mens
Eq Shares O/S (F.V. Rs.10) 11.2mn. innerwear by 36%, womens innerwear 42% and leisure wear
Median Vol (12 mths) 8,173 (BSE+NSE) 44%, were the main drivers. OPM fell by 258 bps QoQ to 18.8%
52 Week High/Low Rs 489/241 due to increase in advertisement & marketing spend. Net
Bloomberg Code PAG.IN
profits for the quarter stood at Rs63mn.
Reuters Code PAGE.BO

z Exclusive Brand Outlets roll out on schedule

SHAREHOLDING PATTERN (%) PAGE set up 3 EBOs in Q2FY08 taking the total number to 25. This
segment currently contributes 11% to the revenues, up from 8%, in
Qtr. Ended Mar-07 Jun-07 Sep-07
Q1FY08.
Promoters 72.4 72.4 72.4
MFs/Fis/ins. Cos 10.2 13.2 15.9
FIIs/NRIs/OCBs 5.9 6.7 5.7 z 4 New Launches across product categories by Q4FY08
PCB 2.9 1.8 1.1 With view to expand its product portfolio in the premium range it is
Indian Public/ Others 8.7 6.0 5.0 launching new products in both mens & womens innerwear category
by Q4FY08. These include International Collection & 3D Innovation in
mens innerwear and newer range in uppers in the womens innerwear
STOCK PERFORMANCE (%)
category.
1M 3M 12M
Absolute 0.5 8.6 56.0 z Capex plan on schedule
Relative (8.9) (17.4) (1.0) PAGE is expanding capacity to 74mn pcs from the existing 33mn pcs by
FY09. The expansion is on schedule and shall enable PAGE to cater to
the growing demand across its product range.
STOCK PRICE PERFORMANCE

VALUATIONS AND RECOMMENDATION

PAGE BSE (Rebased) At the CMP of Rs440, the stock trades at a P/E of 13.8x discounting its
480
FY09 EPS of Rs31.9 & trades at an EV/EBITDA of 8.3x. Revenues of
420 lifestyle sector are growing at a rapid pace, driven by favourable changes
in demographics skewed towards younger population, higher dispos-
360
able income and rising aspirations levels. PAGE is well poised to garner
300 a larger market share in mens and womens innerwear aided by its
capacity expansion and huge brand building programme. We maintain
240 a ‘BUY’ on the stock, with a 12 month price target of Rs510, based on
Mar-07 May -07 Jul-07 Aug-07 Oct-07 our DCF estimates.

KEY FINANCIALS (STANDALONE) KEY RATIOS

Quarter Ended Yr Ended (March) Yr Ended (March)
Rs mn
Mar-07 Jun-07 Sep-07 2007 2008E 2009E 2007 2008E 2009E
Net Sales - 474 481 1,359 1,952 2,576 EPS (Rs) 15.2 23.9 31.9
YoY Gr (%) - - - 34.3 43.6 32.0 ROCE (%) 46.8 41.9 45.1
Op Profits - 101 90 271 412 549 RONW (%) 42.2 34.6 36.0
Op Marg.(%) - 21.4 18.8 19.9 21.1 21.3 P/E (x) 29.0 18.4 13.8
Net Profit - 66 63 169 266 356 EV/Sales (x) 3.5 2.4 1.8
Eq Capital - 112 112 112 112 112 EV/EBIDT (x) 17.4 11.3 8.3

Analyst - Ashish Dangi I ashishd@pinc.co.in I Tel: +91-22-6618 6481 01 November 2007 1

 PERFORMANCE OVERVIEW
Revenues surged due to PAGE Industries Ltd’s Q2FY08 performance was in line with our expectations, as it posted
increase across product a 36% growth in revenues to Rs481mn on YoY basis. This was led by a growth in mens
categories... innerwear segment which grew by 36% to Rs351mn, driven by volume growth of 22% to
6.1mn pcs. Womens innerwear grew by 42% to Rs58mn with volumes growing by 17%.
The leisure wear segment witnessed a strong growth of 44% (although on a small base)
to Rs64mn, thereby increasing its share in total revenues by 71bps to 13% in the current
quarter. Socks, as a category, witnessed a fall in revenues, which stood at Rs8mn on
account of 12% fall in realisations.

Production (Mn pcs) Sales (Rs Mn)

Q2FY08 Q2FY07 YoY (%) Q2FY08 Q2FY07 YoY (%)
Mens wear 6.1 4.8 28.2 Mens wear 351 258 35.7
Womens wear 1.1 1.2 (11.7) Womens wear 58 41 41.8
Leisure wear 0.6 0.4 54.2 Leisure wear 64 45 44.1
Socks 0.2 0.2 22.1 Socks 8 9 (5.7)

Volumes (Mn pcs) Realisation (Rs)

Q2FY08 Q2FY07 YoY (%) Q2FY08 Q2FY07 YoY (%)
Mens wear 6.1 5.0 22.1 Mens wear 58 52 11.1
Womens wear 1.3 1.1 16.5 Womens wear 46 38 21.7
Leisure wear 0.5 0.3 40.2 Leisure wear 142 138 2.8
Socks 0.2 0.1 6.9 Socks 53 60 (11.7)

Realisation for all its product segment were higher during the quarter. Realisation for
mens innerwear, womens innerwear and leisure wear increased by 11%, 22%, 3%
respectively, largely on account of price hike of 3% undertaken in July’07 coupled with
higher sales of premium products.
Higher marketing & advertisement spend resulted in OPM declining by 258 bps QoQ to
18.8%. Operating profits stood at Rs90mn for the current quarter. The other income
stood at Rs13mn mainly on account of interest income from unutilised money from IPO
proceeds. Despite an increase in capital charges to Rs14mn on account of capacity
expansions, PBT stood at Rs90mn and net profits at Rs63mn.
Capex Update
PAGE is in a midst of expanding capacity to 74mn pcs from the existing 33mn pcs by FY09.
The expansion is on schedule and shall enable PAGE to cater to the growing demand
across its product range.

Added 3 EBOs taking the PAGE has set up 3 Exclusive Brand Outlets (EBO) in Q2FY08 taking the total number of
total to 25... outlets to 25. It has set a target of 40 EBOs for itself by FY08. The roll out in EBOs are
aimed at establishing a lifestyle positioning for all its products. This segment contributed
11% to the revenues, up 300 bps, on QoQ basis.

Categorywise sales break-up PAGE’s Sales Mix

Hosiery Stores
35%
Mens wear
73% Womens wear
FBO 12%
11%

Small Depart.
Stores
Leisure wear
20%
Format Stores 15%
16%
Multi Brand Outlets
18%

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New launches across With a view to expand its product portfolio, PAGE intends to add new range in innerwear
product categories... segment in the super premium range. Future launches for men include International
Collection & 3D Innovation and are expected to be launched by Q3FY08 & Q4FY08 re-
spectively. It also intends to add newer range in the womens innerwear by Q4FY08.
These launches shall further strengthen the company’s dominance in the premium range.
OUTLOOK
We maintain our estimates and expect PAGE to post a revenue growth of 44% in FY08 to
Rs2bn and 32% in FY09 to Rs2.6bn. PAGE’s strategy of having seperate SBU focus for
middle and premium range is paying off as the company experienced a 30% and 72%
growth respectively for H1FY08.
Increased share of high margin leisure wear category coupled with 100 bps reduction in
CST from 4% to 3% shall result in OPM margins of 21% for FY08 and 21.3% in FY09.
Thus, operating profits should increase by 52% and 33% to Rs412mn & Rs549mn in
FY08 and FY09 respectively. Robust cash flows would result in reduction in dependence
on debt and consequent minimal interest payments. We expect PAGE to post net profits
of Rs266mn (+57%) and Rs356mn (34%) for FY08 and FY09 respectively.
VALUATIONS
At the CMP of Rs440, the stock trades at a P/E of 13.8x discounting its FY09 EPS of Rs31.9
& trades at an EV/EBITDA of 8.3x. PAGE is well poised to garner a larger market share in
mens and womens innerwear aided by its capacity expansion and huge brand building
programme. We maintain a ‘BUY’ on the stock, with a 12 month price target of Rs510,
based on our DCF estimates.

Company description
PAGE Industries, promoted by Genomal family was incorporated in 1994 in Bangalore
for manufacture and distribution of ‘JOCKEY’ products in India. The company has
exclusive trademark and licensing arrangement with JOCKEY International Inc. for the
use of trademark in India, SriLanka, Maldives, Bangladesh & Nepal. The company
currently operates in mens and womens innerwear & leisure category.

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 Financial Results for the quarter & half year ended 30 September 2007 (Standalone)
Quarter Ended Half Year Ended Year Ended
Particulars (Rs mn)
30/09/07 30/09/07 30/09/06 Gr % 31/03/07

Net Sales 481 955 692 38.1 1,359

Total Expenditure 391 764 553 38.0 1,089

(Inc.)/Dec. Stock-in-trade (23) (17) (38) (123)

Raw Material Consumed 251 480 395 21.5 824

Staff Cost 72 138 93 48.9 204

Administrative & Selling Expenditure 89 160 103 55.5 184

Purchase of Trading Goods 2 2 - -

Operating Profit 90 192 138 38.7 271

Other Income 13 24 13 88.9 27

PBIDT 103 215 151 42.9 298

Interest 7.2 15.6 10 48.8 24

Depreciation 6.5 13.9 5 162.5 15

PBT 90 186 135 37.7 259

Provision for Current Tax 27 57 46 90

Fringe benefit tax - - 1 -

Net Profit 63 129 87 48.4 169

Equity Capital (F.V. Rs 10) 112 112 112 112

Reserves (excl. revaluation reserves) - - - 566

EPS for the period (Rs) 5.6 11.6 7.8 15.2

Book Value (Rs) - - - 61

OPM (%) 18.8 20.1 20.0 19.9

NPM (%) 13.1 13.5 12.6 12.4

Expenditure (% of Net Sales)

Raw Material Consumed (incl. stock adj.) 58.2 60.6 64.6 64.4

Staff Cost 18.3 18.1 16.7 18.7

Administrative & Selling Expenditure 22.9 21.0 18.6 16.9

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 Year Ended March (Figures in Rs mn)

Income Statement 2006 2007 2008E 2009E Cash Flow Statement 2006 2007 2008E 2009E

Revenues 1,012 1,359 1,952 2,576 PBT & Extraord. items 174 259 403 539

Growth (%) 35.6 34.3 43.6 32.0 Depreciation 8 15 21 29

Interest & dividend inc. - - (38) (45)
Total Expenditure 824 1,089 1,540 2,028
Interest paid 16 24 26 26
Operating Profit 188 271 412 549
Tax paid (60) (83) (135) (180)
Growth (%) 145.1 43.9 52.3 33.1 Other Adjustments (2) - - -
(Inc)/Dec in working capital (30) (113) (32) (61)
Interest & dividend income 10 27 38 45
Cash from operations 106 102 246 307
EBIDT 198 298 450 594
Net capital expenditure (33) (140) (92) (158)
(-) Interest 16 24 26 26 Net investments (4) (130) (178) (79)

(-) Depreciation 8 15 21 29 Interest recd 2 - 38 45

Cash from investing activ. (35) (270) (232) (192)
PBT & extraordinary items 174 259 403 539
Issue of eq. shares - 14 - -
(-) Tax provision 61 90 137 182
Share premium - 494 - -
Net Profits 112 169 266 356 Change in debt - 121 (12) 20

Growth (%) 165.3 50.6 57.1 33.8 Dividend paid (55) (56) (83) (96)
Interest paid (16) (24) (26) (26)
Fully dil. Eq. sh. O/s (mn) 11.2 11.2 11.2 11.2
IPO Expenses - (80) - -
Book Value (Rs) 51.4 60.7 77.1 100.4 Cash from financing activ. (71) 470 (122) (102)

Basic EPS (Rs) 10.1 15.2 23.9 31.9 Inc/Dec. in cash 0 302 (108) 13

Balance Sheet 2006 2007 2008E 2009E Key Ratios 2006 2007 2008E 2009E

Equity Share Capital 24 112 112 112 EBIDT (%) 18.6 19.9 21.1 21.3

ROACE (%) 79.0 46.8 41.9 45.1

Reserves & Surplus 101 566 748 1,009
ROANW (%) 117.2 42.2 34.6 36.0

Net worth 125 677 860 1,120

Sales/Total Assets (x) 3.8 1.4 1.8 1.9

Total Debt 132 253 241 261 Debt:Equity (x) 1.1 0.4 0.3 0.2

Current Ratio (x) 1.8 3.0 2.2 2.2

Deferred Tax liability 12 8 10 12
Debtors (days) 20 15 10 10

Capital Employed 269 939 1,111 1,393

Inventory (days) 77 80 80 76

Fixed Assets 115 188 272 449 Net working capital (days) 73 69 61 58

EV/Sales (x) 1.2 3.5 2.4 1.8

Net current assets 139 553 476 550
EV/EBIDT (x) 6.4 17.4 11.3 8.3
Investments 7 137 315 394
P/E (x) 43.6 29.0 18.4 13.8

Total Assets 269 939 1,111 1,393 P/BV (x) 8.6 7.2 5.7 4.4

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Team

Equity Desk Ashwani Agarwalla - Associate -Agro Products / Fertilizers

R. Baskar Babu - Head - Equity Broking
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Gealgeo V. Alankara - Head - Institutional Sales
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Abhishek Gangwani -Associate - Electronics / Hardware
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Sales:

Sachin Kasera - Co-Head - Domestic Equities Anil Chaurasia Alok Doshi

sachink@pinc.co.in 91-22-66186464 91-22-66186462 91-22-66186375

Research Sapna Mehta Sundeep Bhat

91-22-66186391 91-22-66186641
Sameer Ranade - Capital Goods / Utilities
sameerr@pinc.co.in 91-22-66186381 Dealing:

Sujit Jain - Real Estate / Construction Rajesh Khanna / Raju Bhavsar / Pratiksha
idealing1@bloomberg.net 91-22-66186326
sujitj@pinc.co.in 91-22-66186379

Shivkumar R / Manoj Parmar / Hasmukh Prajapati

Amol Rao - Hospitality / Pipes / Packaging
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amolr@pinc.co.in 91-22-66186378

Derivative Desk
Nirav Shah - Sugar / Textiles
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ruchird@pinc.co.in 91-22-66186372 Shailesh Kadam
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Syed Sagheer - Logistics / Light Engineering
syeds@pinc.co.in 91-22-66186390 Ketan Chaurasia
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Chandana Jha - Banking / Financial Services
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Rahhul Aggarwal - Metals Gaurang Gandhi

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Dipti Solanki - Media Hemang Gandhi

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Faisal Memon - Associate - Metals Ketan Gandhi

faisalm@pinc.co.in 91-22-66186389 ketang@pinc.co.in 91-22-66186400

Ashish Dangi - Associate - Lifestyle / Retail Products Rakesh Bhatia - Head Compliance
ashishd@pinc.co.in 91-22-66186481 rakeshb@pinc.co.in 91-22-66186400
6
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