On the road to recovery; long runway for growth ahead
PAGE Industries (PAGE) is well-positioned to capitalize on India’s growing innerwear (9% of the apparel industry) and athleisure markets, aided by favorable macroeconomic trends such as rising incomes, urbanization, and a young population. The company holds a dominant position in the mid-premium innerwear segment, driven by its first-mover advantage, strong brand equity of Jockey, low-cost manufacturing, and a well-diversified product portfolio.
The company’s moat revolves around its strong in-house manufacturing (~80%) across 16 units, producing 280m pieces annually. Its distribution network spans 2,710+ cities, 1,07,702 MBOs, and 1,387 EBOs, with focused expansion strategies and a strong online presence (41% growth in 1HFY25). The company is focusing on expanding its user base by continuously growing its product range along with multiple marketing initiatives. The company is using many social media influencers (foreign influencers too) to drive women-innerwear and athleisure.
After experiencing volume growth challenges over the past six to seven quarters, PAGE witnessed a recovery in 2QFY25 supported by festive demand, rural consumption, and normalizing trade inventory. The distributor inventory levels improved significantly and reduced to ~40 days in 2QFY25 from the elevated levels in FY23 and FY24. The improvement was driven by healthy secondary sales and the effectiveness of its ARS system in optimizing inventory management. We model a revenue and EBITDA CAGR of 13% and 17%, respectively, over FY24-27E. We reiterate our BUY rating on the stock with a TP of INR57,500, premised on 65x Mar’27E EPS (10-year and 5-year average P/E at 65x-70x).
India’s mega consumption theme
Valuation and view
PAGE has had a robust track record of revenue and earnings growth over the past decade. For the period ended FY24, its sales/EBITDA/PAT posted a 15%/13%/15% CAGR despite headwinds. Earnings growth was fueled by best-ofbreed sales growth, with lower utilization of the margin lever. Moreover, it has delivered a RoE of over 40% in the last 10 years.
The women’s innerwear and athleisure segments still have several white spaces in their product portfolio. We expect PAGE’s management to fill these portfolio gaps. Digital and marketing efforts will be helpful to gain share for these segments.
The company maintains a healthy dividend payout ratio. An excellent track record, strong earnings growth potential (~20% EPS CAGR over FY24-FY27E), and high ROEs of over 40% are a great combination and deserve high multiples. We reiterate our BUY rating on the stock with a TP of INR57,500, premised on 65x Mar’27E EPS (10-year and 5-year average P/E at 65x-70x).
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