Dolat Capital is bearish on Page Industries and has recommended reduce rating on the stock with a target of Rs 5770 in its May 30, 2014 research report.
"Page Industries, Net Sales at Rs 2.78bn up 33.4 percent YoY (Dolat est. Rs 2.9bn). EBITDA at Rs 559mn (est of Rs 548mn) was up 52 percent YoY as EBITDA margins expanded by 246bps YoY to 20 percent (est. of 19 percent). Gross margin expanded by 135bps YoY to 52.3 percent. PBT at Rs 546mn was up 58 percent YoY (est of Rs 590mn). Net profit grew by 48.8 percent YoY to Rs 351mn (Dolat est of Rs 408mn). Volume growth for the quarter stood at 16.4 percent. Volume growth in Men segment was at 9.4 percent, Women segment grew by 29.1 percent while Leisure wear growth stood at 20.5 percent. Management has guided for a 15 percent overall volume growth for FY15. Leisure wer has been witnessing a strong growth as offers a huge potential. The company currently sells leisure wear product mainly through EBOs and few retail stores. Distribution expansion in leisure wear would drive growth of the segment. The market is very crowded but the size is higher than innerwear. Realisation improved by 15 percent YoY to Rs 124.6/pc. Men realization grew by 13.9 percent YoY and 5.3 percent QoQ led by mix improvement and price increase taken in Jan 2014. Women segment realization increased by just 8.3 percent QoQ and down 1.1 percent YoY. Leisure wear realization increased by 26.6 percent YoY and down 4.5 percent QoQ, the company has been introducing several products in this segment."
"The company plans to increase its capacity to 190m pcs (up 13 percent YoY) by end of FY15. This would entail an investment of Rs 4-5bn. We believe Page Industries strong distribution reach and Jockey brand provides company a strong platform to introduce new products. Its strong franchise ensures a sustained growth of 25 percent over the next 3-5years. We estimate a 28 percent CAGR in revenue and PAT for the company during FY14-16E. At CMP, the stock trades at 34x FY15E EPS of Rs 178.9 and 26.6x FY16E EPS of Rs 230.8. While we continue to like the company from the long term perspective, given the high valuation we recommendation Reduce," says Dolat Capital research report.
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