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ICICIdirect IndianInnerwearSector InitiatingCoverage PDF
ICICIdirect IndianInnerwearSector InitiatingCoverage PDF
CMP (|)
2,688
351
141
Rating
Buy
Hold
Unrated
Stock Data
Page Industries
Average volume
Market Capitalisation (| crore)
52 week H/L (|)
Promoter holding (%)
Institutional holding (%)
5,590
2,998
3,044 / 1,590
59.7
34.3
Lovable Lingerie
Average volume
Market Capitalisation(| crore)
52 week H/L (|)
Promoter holding (%)
Institutional holding (%)
712,214
590
637 / 242
67.0
14.3
1,933
1,119
170 / 116
74.9
0.0
1m
6.9
(9.3)
-
3m
10.3
11.3
(2.0)
6m
4.7
(24.6)
(7.7)
Price movement
6,000
3,000
5,500
2,000
5,000
1,000
4,500
Mar-11
Jun-11
Sep-11
Nifty (LHS)
Lovable Lingerie
Dec-11
Mar-12
Page Industries
Rupa & Co
Analysts name
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
5,000
4,000
(| billion)
2,820
3,000
2,000
1,000
-
2,167
879
131
2005
1,324
1,436
216
273
2009
2010
1,880
722
2015E
2020E
In India, apparel is the second largest retail category (behind food and
groceries), representing approximately 10% of the total market. Indian
apparel sales are expected to reach an estimated | 4,700 billion by 2020E
on the back of faster growth in the organised apparel segment. Having
grown in excess of 11% over 2005-2010, Images F&R Research expects
the Indian apparel industry to grow at a CAGR of 10.6% during 20102020E. While the rate of growth has slowed down marginally, the
organised apparel segment is expected to grow at a CAGR of 21.3%
during the same period, at 3x the growth of the unorganised segment.
According to Images F&R Research, the organised apparel
100
(%)
75
50
87
86
75
84
25
0
25
13
14
16
2005
2009
2010
2015E
60
40
2020E
Page 2
1,635
1,500
1,000
663
577
450
500
158
447
142
Menswear
Womenswear
2009
Boyswear
Girlswear
2020E
Historically, the mens apparel market in India has been significantly larger
than the womens apparel market. With a lower share of women in the
workforce (mainly urban), womens wardrobes have traditionally been
limited to home wear and items for special occasions. Now, women are
more willing to dress differently when they venture beyond the home
to shops, or visit a school or office. On the back of this, Images F&R
Research expects the womens wear segment to post the highest growth
during 2009-2020E. While the mens wear and boys-wear segment is
expected to grow at a CAGR of 8.5% and 10.0%, respectively, the
womens wear and girls-wear segment is expected to grow by 12.2% and
11.0%, respectively.
Innerwear
7%
Womenswear
(excl.
innerwear)
43%
Innerwear
10%
Menswear
(excl.
innerwear)
43%
Menswear
(excl.
innerwear)
50%
Womenswear
(excl.
innerwear)
47%
Source: Images F&R Research, ICICIdirect.com Research
The Indian innerwear market is still at a very nascent stage and has
significant growth potential. Images F&R Research expects the share of
the innerwear segment to reach 10% by 2020E (from 7% in 2010). The
increasing purchasing power of consumers and growing number of
working women, along with increased awareness about better fits,
quality, colours and styling as well as an openness to indulge in
innerwear apparel have led to a significant growth of the segment. Also,
the growth in organised retail is offering better buying space to the
Page 3
40,000
(| crore)
43,721
30,000
23,428
20,000
11,250
12,698
14,339
2009
2010
2011
10,000
2015E
2020E
Men's Innerwear
(| 5,800 crore)
Unorganised
(| 2,400 crore)
Women's Innerwear
(| 8,500 crore)
Organised
(| 3,400 crore)
Unorganised
(| 5,100 crore)
Organised
(| 3,400 crore)
Page 4
8.5
7.3
7.3
12.0
7.0
10.5
6.5
9.0
2009
2010
2011
2015E
13.0
13.5
7.8
7.2
14.7
15.0
(%)
(%)
8.0
7.5
11.5
11.2
2020E
2009
2010
11.8
2011
2015E
2020E
The Indian innerwear market has witnessed a changing trend in the past
with more and more people opting for better quality branded products.
As discussed in Exhibit 4 and 5 the share of innerwear in the total apparel
market is likely to increase from 7% in 2010 to 10% in 2020E. While the
same is expected to increase from 7.3% in 2011 to 8.4% in 2020E for the
mens segment, the womens segment is expected to see the share
increase to 14.7% by 2020E (from 11.8% in 2011).
1400
600
200
1204
100
136
160
202
400
892
983
800
663
1000
684
821
908
1008
1200
901
993
1061
1174
% CAGR (2006-09)
4.9
9.2
13.8
22.0
26.4
13.9
371
386
402
428
Low
Economy
Medium
Premium
Super premium
Total
(| crore)
0
Low
2006
Economy
Medium
Premium
2007
2008
2009
Super premium
During 2006-2009, the mens innerwear segment grew 13.9%, mainly led
by growth in the medium, premium and super premium categories. The
growing per capita income and the consequent increase in disposable
incomes led to a faster growth of the premium and super premium
categories (22.0% and 26.4% CAGR during 2006-09). Over a span of four
years, both these segments have doubled in size. Also, the entry of
international brands, growth of modern retail formats and availability of
more choices have led to the growth of this segment.
Page 5
4.2
4.6
5.0
24.4
27.6
28.0
30.0
25.4
25.8
25.1
33.1
30.8
30.2
29.2
13.6
12.0
11.4
10.7
2006
2007
2008
2009
Premium
Super premium
75
25.2
50
(%)
3.7
25
-
Low
Economy
Medium
64
73
77
88
500
723
1000
1170
1194
1241
1303
1500
600
624
2000
517
2103
2250
2453
2674
2500
(Nos. in lakhs)
Low
Economy
Medium
Premium
Super premium
Total
% CAGR (2006-09)
3.7
8.3
10.0
11.9
11.2
8.0
859
962
1038
1142
Premium
Super premium
0
Low
Economy
2006
Medium
2007
2008
2009
Page 6
Exhibit 13: Average selling price trend in mens innerwear segment (category-wise)
250
157
150
128
100
80
50
0
158
149
166
87
85
44
43
230
208
185
200
(|)
Low
Economy
Medium
Premium
Super premium
% CAGR (2006-09)
1.0
0.8
3.2
9.1
13.6
88
44
43
32
32
32
33
2006
2007
2008
2009
Low
Economy
Medium
Premium
Super premium
% CAGR (2006-09)
4000
9.8
Super premium
Total
36.2
16.8
2500
2000
1500
1000
500
0
Low
2006
Economy
2007
Medium
2008
Premium
127
192
217
321
27.0
933
Premium
3000
456
630
694
17.3
3413
Medium
3500
2115
2652
2812
13.3
1870
2182
2382
2719
Economy
(| crore)
Low
387
427
461
512
Super premium
2009
Page 7
3.2
10.4
3.3
10.6
4.1
11.8
42.7
43.6
42.8
43.2
37.7
35.9
36.3
34.4
7.8
7.0
7.0
6.5
2006
2007
2008
2009
50
(%)
2.6
9.2
25
-
Low
Economy
Medium
Premium
Super premium
2,000
1,000
500
1,148
1,194
1,265
1,392
1,500
Low
Economy
2006
2007
Medium
2008
19
23
23
31
2,500
158
187
195
250
2,334
2,521
2,672
3,109
3,000
(Nos. in lakhs)
Low
Economy
Medium
Premium
Super premium
Total
% CAGR (2006-09)
6.6
10.0
11.5
16.6
18.9
9.9
1,321
1,480
1,539
1,831
3,500
Premium
Super premium
2009
Page 8
Exhibit 17: Average selling price trend in womens innerwear segment (category-wise)
1050
939
1029
854
900
683
750
(|)
Low
Economy
Medium
Premium
Super premium
% CAGR (2006-09)
2.9
4.0
5.1
8.8
14.6
600
450
300
150
0
87
34
2006
89
36
2007
Low
Economy
374
183
179
160
80
356
336
290
90
36
2008
Medium
186
37
2009
Premium
Super premium
Despite a price hike of 8.8% and 14.6% CAGR during 20062009 in the premium and super-premium categories,
volumes of the same segments have grown by a CAGR of
16.6% and 18.9%, respectively. This clearly demonstrates
(a) the shift from low, mid and economy segments to
premium and super-premium segments and (b) customers
willingness to pay a higher price for a better quality
product
In value terms, the womens innerwear market comprises 66.3% share (as
compared to 52.7% volume share) of the overall innerwear market. This
clearly indicates that the ASP in the womens segment is higher than that
in the mens segment. The womens innerwear segment has product
offerings ranging from as low as | 37 a piece to | 1,029 a piece. ASPs in
the premium segment have increased from | 290 per piece in 2006 to
| 374 per piece in 2009, representing a CAGR of 8.8% during the period.
Similarly, ASPs in the super-premium segment have witnessed 14.6%
CAGR to reach | 1,029 per piece in 2009, up from | 683 in 2006. The
aggressive growth observed in the premium and super-premium
segments is testimony to the fact that consumers have moved beyond
their over-sensitivity to pricing.
Exhibit 18: Womens segment set to outpace mens segment
35,000
30,054
30,000
(| crore)
25,000
20,000
14,942
15,000
10,000
5,000
6,460
4,790
7,429
5,269
8,543
5,796
2009
2010
2011
13,666
8,486
2015E
2020E
Page 9
Brand
Mode
1995
Jockey
Brand Licensing
1996
Lovable
2002
Triumph International
2003
Enamor
2006
La Senza
2007
Etam
2007
Amant
2007
Undercolors
2007
Espirit
2007
Calvin Klein
Brand Licensing
2007
La Perla
2009
In the last one or two decades, the Indian market has witnessed an influx
of a host of foreign players across different product categories. In the
present retail scenario, India is well positioned as a promising destination
for many international brands.
The Indian innerwear segment, which was predominantly
operated by local Indian stores, witnessed some positive
changes after the entry of foreign players. Innerwear
companies have now started spreading product awareness
through advertisements (more openly), fashion shows etc.,
to reach out to consumers. Also, with an increasing
presence of modern retail, innerwear products are
displayed through exclusive brand outlets and also in malls,
etc. vis--vis being sold in local stores with minimal display
A large part of the Indian innerwear market was highly dominated by the
low, economy and mid-market segment offerings of domestic suppliers.
With the entry of foreign brands, the dynamics of the Indian innerwear
market started to change. Many international players such as Lovable,
Triumph, Etam, Jockey and many more entered the Indian markets and
are successfully expanding in India through the franchising route.
The entry of foreign players has also revamped the way the industry
operates. The innerwear segment was earlier not as bold in terms of
advertising and product display. Earlier, innerwear purchases were limited
to local stores and there was not much advertising about the same.
International brands have changed both these aspects about the industry
also. The companies have now started spreading product awareness
through advertisements (more openly), fashion shows, etc. to reach out
to consumers and understand their preference. Also, with the increasing
presence of modern retail, innerwear products are displayed through
exclusive brand outlets and also in malls, etc.
Page 10
25
21
1200
20
600
1248
400
200
15
12
800
244
2005
Indian Retail Sector
28
10
262
725
3
425
(%)
($ billion)
1000
85
5
-
2010
Organised Retail
2015E
2020E
Page 11
80,000
2010
2011
2012E
2013E
2014E
2015E
2016E
246,805
0
2005
190,639
(|)
160,000
147,255
105,705
96,885
81,180
240,000
113,744
20,000
74,070
40,000
68,715
60,000
61,695
(|)
80,000
88,785
100,000
319,518
320,000
120,000
2010
2015E
2020E
2025E
38
34
32
63
66
68
2005
2015E
2025E
50
25
0
Dependents
Page 12
Exhibit 24: Changing population mix: Number of people in age group of 15-64 to go up from 64.8% of population in 2011 to 67.0% in 2020E
(Age in years)
(Population in million)
80
60
40
90-94
90-94
75-79
75-79
60-64
60-64
45-49
45-49
30-34
30-34
15-19
15-19
0-4
0-4
20
20
40
60
80
80
60
40
20
2011
Male Population
0
2020E
20
40
60
80
Female Population
28
30
44
300
33
225
800
22
400
11
(Nos in million)
1,200
40
(%)
(Nos in million)
1,600
0
2001
Total population
2008
2030E
10
3
1
13
61
192
180
2005
2015E
128
150
75
143
Urban Population
Lower Class
Urbanization rate
Source: MGI, ICICIdirect.com Research
Middle Class
2025E
Upper Class
Source: MGI, ICICIdirect.com Research; Classes are based on income levels with
Lower class representing income of <|200,000 per annum; Middle class between
|200,000 and |1,000,000 per annum ; and Upper class >| 1,000,000 per annum
2000
2010
2020E
135
2.4x
328
2.7x
895
47
4.0x
186
4.0x
752
43
3.9x
168
3.9x
664
17
4.2x
71
4.2x
296
Apparel
18
3.3x
59
3.8x
225
Health
14
3.5x
49
3.8x
183
Others
25
5.2x
129
4.4x
570
299
3.3x
990
3.6x
3585
Food
Total
Page 13
300
250
200
150
19.2
14.4
14.4
57.6
100
50
120.0
Exhibit 29: Professional affluent & small town next billion to enjoy a
large share of consumption
22.8
14.3
28.5
37.1
17.1
4,000
3,000
($ billion)
85.5
2,000
79.8
1,000
2020E
2010
Strugglers
Rural Aspirers
Professional Affluent
238
258
466
358
430
179
824
394
2010
Strugglers
Rural Aspirers
Professional Affluent
932
2020E
Small Town Next Billion
Urban Aspirers
The BCG-CII report has divided the Indian population into seven different
segments based on annual income, education and lifestyle (refer Exhibit
30). BCG-CII expects the percentage of strugglers to come down from
50% of the total households in 2010 to 28% of total households in 2020E.
On the other hand, the share of rural and urban aspirants and traditional &
professional affluent is expected to increase from 20% in 2010 to 36% in
2020E. On the back of this growing affluence, BCG-CII expects the total
consumption to grow 3.6x to $3,585 billion by 2020E (refer Exhibit 27 and
29). The professional affluent and the small town next billion segments
will be the driving force of this consumption (to contribute ~50% of the
consumption). The apparel segment, which accounts for 6% of the
consumer spending, is expected to grow 3.8x to $225 billion by 2020E.
The spending on apparel tends to increase with increase in disposable
income. According to the BCG-CII research, apparel constitutes 10% of
the consumption basket of affluent consumers as compared to only 5% of
the small town next billion. Therefore, with rising income levels, the
spending on apparel is likely to go up.
Exhibit 30: Segmentation of Indian population
Segment
Strugglers (50% of the households)
Small Town Next Billion (24% of the households)
Large Town Next Billion (6% of the households)
Rural Aspirers (6% of the households)
Definition
With an annual income less than US$3,300, typically illiterate with limited education, these consumers have jobs that
are manual labour based with very low income, generally daily wage
These consumers are similar to the Large Town Next Billion segment but live in smaller cities & towns and in rural
India
With incomes between US$3,300 and US$7,400, these consumers typically have basic education levels and have
small businesses or low paying jobs. Their income levels allow them to sustain a basic lifestyle. They live in towns
and cities with a population greater than 500,000
With income levels, education and occupation similar to Urban Aspirers, these consumers live in rural India. They
consume less than their urban counterparts and are comparatively less aspirational
With an annual household income between US$7,400 and US$18,500, these consumers are educated and have midsized businesses or stable jobs. They live in urban cities and have high aspirations for their lifestyle
With annual household income levels similar to the Professional Affluent, these consumers are less educated and
typically self employed. They are more value conscious and less comfortable with credit than the Professional Affluent
With an annual household income above US$18,500, these consumers are well educated and work as executives,
managers or are self employed professionals
Page 14
Valuation
Exhibit 31: Relative Valuation (FY14E)
Company
Lovable Lingerie
Page Industries
Rupa & Company
EBITDA Margin
19.1
20.7
12.5
RoE
15.4
56.2
22.6
RoCE
18.4
47.0
23.8
P/E
19.6
19.9
18.0
EBITDA Margin
2
1
3
RoE
3
1
2
RoCE
3
1
2
P/E
2
3
1
Lovable Lingerie
Page Industries
Rupa & Company
Debt/ EBITDA
1
2
3
Final Ranking
2
1
3
RoE (%)
30.9
39.9
43.4
38.2
44.3
39.3
P/E (x)
25.1
23.5
27.7
26.4
45.1
29.6
EV/EBITDA (x)
18.2
18.1
19.7
17.0
25.8
19.7
Revenue CAGR
(FY11-13E)
22.0
21.3
27.6
18.5
40.1
25.9
Page 15
Initiating Coverage
March 29, 2012
Rating Matrix
Rating
Buy
Target
| 3106
Target Period
12 months
Potential Upside
16 %
FY12E
FY13E
FY14E
44.8
40.9
47.8
39.5
48.5
48.9
30.0
33.6
35.9
23.3
27.2
27.2
FY11
FY12E
FY13E
FY14E
51.2
59.2
16.3
39.6
24.2
34.4
39.7
23.4
26.9
18.2
25.3
29.2
17.6
20.2
14.0
19.9
23.0
13.9
16.0
11.2
Net Sales
EBITDA
Net Profit
Stock Data
Bloomberg/Reuters code
Sensex
Average volume
Market Capitalisation
EV
52 week H/L
Equity capital
Face value
Promoter's stake (%)
1m
6.9
(9.3)
-
3m
10.3
11.3
(2.0)
6m
4.7
(24.6)
(7.7)
12m
67.2
38.8
NA
Valuations
Price movement
6,000
3,000
5,600
2,500
5,200
2,000
4,800
4,400
1,500
Apr-11
| 2688
Jul-11
Sep-11
Price (R.H.S)
Dec-11
Mar-12
Nifty (L.H.S)
Analysts name
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
Page has always traded at rich multiples owing to the strong financials,
robust revenue growth (CAGR of over 30% despite higher base) and free
cash flow generation. Apart from the robust and consistent topline
growth, the company has also consistently rewarded its shareholders. We
have valued the stock at 23.0x FY14E EPS of | 135.1 to arrive at a target
price of | 3,016. We are initiating coverage on Page Industries with a BUY
rating. At the CMP, the stock is trading at 25.3x and 19.9x its FY13E and
FY14E EPS of | 106.2 and | 135.1, respectively.
Exhibit 34: Valuation Metrics
Net Sales (| crore)
EBITDA (| crore)
PBT (| crore)
Net Profit (| crore)
EPS (|)
PE (x)
PBV (x)
EV/EBITDA (x)
ROCE (%)
RONW (%)
FY10
339.4
64.2
58.6
39.6
35.5
18.3
7.3
12.1
35.9
40.0
FY11
491.6
90.4
87.4
58.5
52.5
51.2
24.2
16.3
33.7
47.3
FY12E
686.0
134.2
131.0
87.2
78.2
34.4
18.2
23.4
39.0
52.8
FY13E
892.0
179.2
178.0
118.5
106.2
25.3
14.0
17.6
43.5
55.3
FY14E
1,099.6
228.0
226.3
150.6
135.1
19.9
11.2
13.9
47.0
56.2
Company background
Holding (%)
59.7
34.3
6.0
60
60
34
Q3FY12
60
34
Q2FY12
Promoters
60
34
Q1FY12
34
Q4FY11
Institutional investors
(%)
19.3
22.3
22.0
22.5
23.1
15.7
16.0
16.7
17.9
19.4
62.2
59.4
61.3
59.6
57.5
FY10
FY11
FY12E
FY13E
FY14E
Men
Women
Sports
Page 17
Investment Rationale
Pages licensing agreement with Jockey International was
renewed in July 2010 wherein Page continues to hold the
sole license for India, Sri Lanka, Nepal and Bangladesh.
During this renewal, UAE was also added to the list and the
license has been extended till 2030
41.5
35.6
34.3
39.5
32.4
33.3
30.0
25.9
23.3
FY13E
FY12E
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
19.5
FY14E
31.8
FY03
(%)
50
45
40
35
30
25
20
15
10
5
-
Topline growth
Year
Brand
Mode
1995
Jockey
Brand Licensing
1996
Lovable
2002
Triumph International
2003
Enamor
2006
La Senza
2007
Etam
2007
Amant
2007
Undercolors
2007
Espirit
2007
Calvin Klein
Brand Licensing
2007
La Perla
2009
Page 18
1900
1876
1934
1935
1937
1949
1960
1982
2001
1947
2004
2006
Page 19
Pricing power
Over the years, Page has witnessed healthy volume growth despite taking
constant price hikes. Considering its strong brand equity and also the first
mover advantage, Page is able to command a premium over other
players. Also, as compared to international players, Pages prices are not
as high. Hence, it has further headroom to hike prices.
Exhibit 39: Realisation vs. volumes (mens segment)
100
91.8
90
83.5
80
70
69.6
6.4
5.0
61.6
60
5.8
4.2
50
40
3.4
30
FY10
FY11
FY12E
FY13E
106.6
110
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
96.8
100
2.0
85.6
90
2.0
73.6
80
63.5
70
60
0.8
50
1.1
1.5
1.6
1.0
1.3
0.5
-
40
FY10
FY14E
FY11
FY12E
FY13E
FY14E
FY07-12E
16.3
16
13.6
14
10.9
(pieces in crore)
12
10
8.3
8
6
4
4.5
2.2
5.1
3.1
2
0
FY07
FY08
FY09
FY10
FY11
FY12E
FY13E
FY14E
Page 20
Hosiery stores
50%
Exclusive brand
outlets
4%
Large format stores
6%
Page 21
Cotton yarn and fabric account for ~70% of the total raw material costs.
An inability to pass on the impact of the increase in raw material prices
will have an adverse impact on the companys profitability. Also, too
many price hikes will also take a toll on the volume growth prospects of
the company.
Exhibit 43: Cotton and cotton yarn spread and impact on operating margin
21
80
70
20
20.0
20.0
60
(|/ kg)
40
30
20
18.8
51.6 18.6
55.0
18.9
59.7
43.8
19
68.8
56.6
(%)
20
50
19
18.4
18
10
-
18
FY06
FY07
FY08
FY09
FY10
FY11
EBITDA Margin
23.6
24
22.4
(%)
22
20
20.6
18.8
22.0
22.6
21.1
19.3
18
16
FY07
FY08
FY09
FY10
FY11
FY12E
FY13E
FY14E
Page 22
Non-renewal of license
The Genomal brothers have a long standing relationship of over 50 years
with Jockey International. However, failure to renew the license post 2030
will significantly affect the company.
Slowdown in economic growth
A blip in economic growth will affect the financial
performance of the company as demand for its products
will begin to weaken
The Indian markets are crowded with a host of brands both national and
international. The consumer has a whole host of options from which to
pick and choose products. The experimental nature of humans makes
them want to try new products launched in the market. Also, customers
get easily attracted towards brands that offer big discounts. On the back
of these factors, establishing a permanent connect and gaining brand
loyalty becomes difficult for companies. This leads to companies losing
business to their competitors.
Page 23
Financials
Sales to grow at CAGR of 30.8% during FY11-14E
34.3
32.4
33.3
686
600
FY07
255
192
136
300
150
30.0
492
450
FY08
FY09
23.3
339
mens segment
(| crore)
39.5
750
1,100
900
44.8
41.5
892
1,050
FY10
Net Sales
FY11
FY12E
FY13E
50
45
40
35
30
25
20
15
10
5
-
(%)
FY14E
(pieces in crore)
6.0
5.0
6.4
5.0
4.0
3.0
2.5
2.0
(pieces in crore)
7.0
4.2
3.4
2.0
-
2.0
1.5
1.6
1.3
1.0
0.5
1.0
0.8
1.1
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
Page 24
80.0
83
62
120.0
99
100.0
70
(| per piece)
(| per piece)
100.0
92
60.0
40.0
20.0
80.0
97
86
107
74
64
60.0
40.0
20.0
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
250
18.9
18.8
200
(| crore)
20.0
20.0
19.6
18.4
20.7
22
228
20
18
179
150
16
134
100
14
90
50
-
20.1
27
FY07
36
51
FY08
FY09
(%)
64
12
10
EBITDA
FY10
FY11
FY12E
FY13E
FY14E
Page 25
60
80
59
50
47
50
45
55
(| per share)
60
60
45
29
40
30
20
15
10
17
21
26
35
53
74
FY07
FY08
FY09
FY10
FY11
FY12E
FY13E
FY14E
DPS
(%)
60
52.8
36.4
(%)
40
20
56.2
47.3
50
30
55.3
40.0
30.8
25.1
27.5
28.5
FY07
FY08
33.8
35.9
33.7
FY09
FY10
FY11
39.0
43.5
47.0
10
-
ROE
FY12E
FY13E
FY14E
ROCE
Page 26
15
135
90
12.5
12.4
13.7
12.7
12.4
11.7
13
11.9
151
118
45
87
17
FY07
24
32
40
FY08
FY09
FY10
14
(%)
(| per share)
13.3
12
11
59
10
PAT
FY11
FY12E
FY13E
FY14E
Page 27
Valuation
Considering the improving return ratios, enhanced operating margins and
a topline CAGR of over 30% (despite a higher base) we have valued the
stock at 23.0x FY14E EPS of | 135.1 to arrive at a target price of | 3,016.
We are initiating coverage on Page Industries with a BUY rating. At the
CMP, the stock is trading at 25.3x and 19.9x its FY13E and FY14E EPS of
| 106.2 and | 135.1, respectively.
Considering the strong financials and robust revenue growth trajectory,
Page has always traded at rich multiples. The growing exuberance in the
Indian economy over the last few years and improving demographics of
the nation have lent credence to the companys rich valuations.
(|)
22x
2,400
18x
1,800
14x
1,200
10x
6x
600
Avg. Price
6x
10x
14x
18x
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
22x
Apart from the robust and consistent topline growth, the company has
also consistently rewarded its shareholders. Due to this, as well as strong
fundamentals, the stock had outperformed the Midcap Index during the
steep fall in October 2008.
Exhibit 55: Page Industries vs. CNX Midcap Index
500
5,700
450
5,100
4,500
400
3,900
350
3,300
300
Aug-08
2,700
Oct-08
Dec-08
Page Industries
Feb-09
Apr-09
While the CNX Midcap index took a 30.5% hammering during August
2008 April 2009, Page Industries remained flat (down 0.6%).
Page 28
50.0
40.0
30.0
20.0
10.0
(10.0)
(20.0)
(30.0)
(40.0)
(50.0)
3000
2500
(|)
2000
1500
1000
500
0
Apr-07
Avg. Price
Feb-08
Dec-08
6x
10x
Oct-09
14x
Aug-10
18x
(| crore)
Jun-11
22x
It has been observed in the past that the market rewards a higher multiple
in anticipation of an increase in free cash flows (FCF). Due to high capex,
the company was unable to generate any free cash flows in FY11. Going
forward, we expect the company to return to being free cash flows
positive and, therefore, expect a multiple re-rating for the stock.
Page 29
Financial Tables
Exhibit 57: Profit & loss account
(| crore)
Net Sales
% Growth
Other Income
Raw Materials
Royalty
Manufacturing Expenses
Employee Expenses
Sell. & Admin. Expenses
Total Exp.
% Growth
Operating Profit
Depreciation
Interest expense
PBT
Tax
Prior Period Items
Net Profit
% Growth
Equity
Dividend %
EPS
FY09
254.7
32.4
6.4
89.0
12.5
37.1
42.1
23.2
203.8
30.5
50.9
7.3
3.1
46.9
15.2
0.0
31.6
32.8
11.2
170.0
28.4
FY10
339.4
33.3
6.4
115.3
16.8
48.1
58.1
37.0
275.2
35.1
64.2
9.0
3.0
58.6
18.9
0.1
39.6
25.2
11.2
210.0
35.5
FY11
491.6
44.8
12.1
179.7
24.3
61.2
89.7
46.4
401.2
45.8
90.4
9.8
5.2
87.4
29.2
(0.4)
58.5
47.8
11.2
260.0
52.5
FY12E
686.0
39.5
17.1
250.0
34.0
82.3
121.4
64.1
551.8
37.5
134.2
12.2
8.1
131.0
43.8
87.2
48.9
11.2
351.7
78.2
FY13E
892.0
30.0
21.9
323.5
44.2
102.6
161.2
81.3
712.8
29.2
179.2
14.5
8.6
178.0
59.5
118.5
35.9
11.2
531.0
106.2
FY14E
1,099.6
23.3
23.6
381.4
54.4
128.7
205.4
101.7
871.6
22.3
228.0
16.7
8.6
226.3
75.7
150.6
27.2
11.2
742.8
135.1
FY10
11.2
87.9
44.8
10.0
2.0
155.8
77.6
4.9
3.0
94.6
20.5
3.0
16.3
134.3
64.0
70.3
155.8
FY11
11.2
112.6
100.0
15.0
2.6
241.4
93.1
7.4
3.0
164.7
25.8
2.6
42.3
235.5
97.6
137.9
241.4
FY12E
11.2
153.9
116.7
30.9
3.9
316.5
118.9
14.4
5.8
197.3
39.5
4.8
54.1
295.6
118.2
177.5
316.5
FY13E
11.2
203.1
126.7
37.5
5.1
383.5
147.4
16.0
6.6
241.7
46.4
4.1
74.6
366.8
153.2
213.6
383.5
FY14E
11.2
256.8
137.4
44.0
6.9
456.2
174.5
9.6
7.9
293.7
54.2
7.7
93.7
449.4
185.1
264.3
456.2
FY09
11.2
75.7
41.9
1.7
130.4
55.0
11.8
5.2
68.0
17.0
10.3
44.9
140.2
81.9
58.4
130.4
Page 30
FY09
46.8
7.3
2.8
(13.6)
2.6
(3.0)
0.0
43.0
(11.6)
31.5
(30.5)
24.8
6.0
0.2
4.7
(26.3)
(21.6)
0.2
10.3
FY10
58.5
9.0
2.5
(18.4)
(0.3)
(1.1)
0.0
50.2
(20.5)
29.7
(24.7)
2.3
1.5
(20.9)
17.8
(33.9)
(16.1)
10.3
3.0
FY11
87.8
9.8
4.6
(29.8)
(0.9)
0.3
71.9
(72.0)
(0.2)
(28.1)
0.9
(27.3)
60.3
(33.2)
27.1
3.0
2.6
FY12E
131.0
12.2
8.1
(43.8)
1.3
108.9
(37.4)
71.5
(45.1)
(2.8)
(47.8)
32.6
(54.0)
(21.5)
2.6
4.8
FY13E
178.0
14.5
8.6
(59.5)
1.3
142.8
(36.8)
106.0
(44.5)
(0.8)
(45.3)
16.6
(77.9)
(61.3)
4.8
4.1
FY14E
226.3
16.7
8.6
(75.7)
1.8
177.8
(47.0)
130.7
(37.4)
(1.3)
(38.7)
17.2
(105.7)
(88.5)
4.1
7.7
FY10
FY11
FY12E
FY13E
FY14E
43.7
18.2
20.6
41.9
17.5
21.1
44.8
15.2
22.4
45.3
14.9
22.0
45.4
14.4
22.6
43.8
14.8
23.6
20.0
12.4
18.9
11.7
18.4
11.9
19.6
12.7
20.1
13.3
20.7
13.7
228.3
45.6
426.3
77.8
9.2
28.4
34.9
17.0
304.3
57.5
696.0
88.8
2.6
35.5
43.6
21.0
440.7
81.0
1,324.6
111.0
2.3
52.5
61.3
26.0
615.0
120.3
2,816.0
148.0
4.3
78.2
89.1
35.2
799.7
160.7
2,831.6
192.1
3.7
106.2
119.2
53.1
985.9
204.4
2,843.7
240.2
6.9
135.1
150.0
74.3
36.4
33.8
27.9
40.0
35.9
26.8
47.3
33.7
25.1
52.8
39.0
28.9
55.3
43.5
32.2
56.2
47.0
34.7
Page 31
FY09
31.5
(5.4)
128.7
0.5
0.3
14.2
0.8
FY10
29.8
1.1
153.8
0.6
0.4
18.6
0.9
FY11
(0.2)
(36.7)
238.8
0.9
0.5
15.4
1.3
FY12E
71.5
11.0
312.6
0.9
0.5
15.0
1.1
FY13E
106.0
42.7
378.4
0.8
0.4
19.1
0.9
FY14E
130.7
72.9
449.3
0.7
0.4
24.5
0.8
0.7
1.1
0.2
2.0
1.5
0.7
1.1
0.2
2.2
1.6
0.7
1.1
0.2
2.0
1.9
0.7
1.1
0.2
2.2
1.9
0.7
1.1
0.2
2.3
1.8
0.7
1.1
0.2
2.4
1.7
(YoY Growth %)
Net Sales
EBITDA
Net Profit
32.4
40.5
32.8
33.3
26.1
25.2
44.8
40.9
47.8
39.5
48.5
48.9
30.0
33.6
35.9
23.3
27.2
27.2
Turnover Ratios
Working Capital / Sales (x)
Inventory turnover (days)
Debtor turnover (days)
Creditor turnover (days)
Current Ratio (x)
0.2
89.8
18.7
65.5
1.7
0.2
87.4
20.1
61.7
2.1
0.3
96.3
17.2
56.0
2.4
0.3
105.0
21.0
58.0
2.5
0.2
98.9
19.0
57.0
2.4
0.2
97.5
18.0
55.0
2.4
29.4
7.3
11.6
30.5
(5.4)
37.4
9.0
20.5
24.7
1.1
53.6
9.8
72.0
28.1
(36.7)
81.2
12.2
37.4
45.1
11.0
109.7
14.5
36.8
44.5
42.7
140.6
16.7
47.0
37.4
72.9
Valuation Ratios
Price to earnings ratio (x)
EV / EBITDA (x)
EV / Sales (x)
Dividend Yield (%)
Price / BV (x)
14.0
9.3
1.9
4.3
5.1
18.3
12.1
2.3
3.2
7.3
51.2
16.3
3.0
1.7
24.2
34.4
23.4
4.6
1.0
18.2
25.3
17.6
3.5
1.3
14.0
19.9
13.9
2.9
2.0
11.2
Page 32
Initiating Coverage
March 29, 2012
Rating Matrix
Rating
Hold
Target
| 350
Target Period
12 months
Potential Upside
0%
Net Sales
EBITDA
Net Profit
FY12E
32.3
22.7
25.2
PE
Target PE
EV/EBITDA
Target EV/EBITDA
Price/BV
FY12E
33.4
33.3
23.5
23.5
3.8
Stock Data
Bloomberg/Reuters code
Sensex
Average volume
Market Capitalisation
EV
52 week H/L
Equity capital
Face value
Promoter's stake (%)
FY14E
19.7
25.8
28.7
17,059
712,214
| 590 crore
| 537 crore
|637 / 242
| 16.8 crore
| 10
67.0
1m
6.9
(9.3)
-
3m
10.3
11.3
(2.0)
6m
4.7
(24.6)
(7.7)
12m
67.2
38.8
NA
Price movement
6,000
700
600
5,600
500
5,200
400
4,800
300
4,400
200
Apr-11
Jul-11
Sep-11
Price (R.H.S)
| 351
Dec-11
Mar-12
Valuations
We have valued Lovable at a 15% discount to Page Industries valuation
multiple (23.0x FY14E EPS) considering the lower return ratios and
marginally lower operating margin. Based on 19.6x FY14E EPS of | 17.9,
we have arrived at a target price of | 350. We are initiating coverage on
Lovable Lingerie with a HOLD rating. At the CMP, the stock is trading at
25.2x and 19.6x its FY13E and FY14E EPS of | 13.9 and | 17.9,
respectively.
Exhibit 62: Valuation Metrics
Nifty (L.H.S)
Analysts name
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
FY10
87.0
16.1
14.3
10.0
14.4
60.1
41.2
FY11
104.0
19.5
18.5
14.1
8.4
41.9
4.2
20.7
12.8
10.0
FY12E
137.6
23.9
23.2
17.6
10.5
33.4
3.8
23.5
14.4
11.4
FY13E
165.7
30.1
30.7
23.4
13.9
25.2
3.4
18.3
16.5
13.5
FY14E
198.4
37.9
39.5
30.1
17.9
19.6
3.0
14.2
18.4
15.4
Company background
Holding (%)
67.0
14.3
18.8
67
67
67
67
60
40
20
14
14
16
15
Q3FY12
Q2FY12
Q1FY12
Q4FY11
Promoters
Institutional investors
Page 34
Investment Rationale
Presence in fastest growing segments
The Indian apparel market is expected to grow at a CAGR of 10.6% during
2009-2020E to | 4,700 billion. During the same period, the innerwear
segment is expected to grow faster at a CAGR of 13.2%.
Exhibit 63: Indian apparel market - 2009
2009
Womenswear
37%
Womenswear
44%
Boyswear
10%
Boyswear
10%
Girlswear
9%
Menswear
44%
Menswear
36%
Girlswear
10%
Exhibit 65: Lovables topline growth vs. womens innerwear industry growth
(%)
segment
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
44.6
40.0
25.6
15.3
20.3
19.6
24.4
15.0
15.0
2011E
2012E
7.9
2008
2009
2010
Industry growth
Page 35
Segment
Sub-brands
Lovable
Premium
Daisy Dee
Mid
Lovable has entered into a joint venture (90:10) with Lifestyle Galleries
(LGL), a London based company. Through the JV named Lovable
Lifestyles Pvt Ltd (Lovable Lifestyles), it plans to manufacture and market
super-premium products in India, from its partners range. All products
for both women and men will be launched under the London Calling
brand in India and other licensed territories. Lovable has paid a
consideration of | 25 crore for the same. LGL has agreed to license its
know-how and trademark to Lovable. Over and above this, LGL has
agreed to provide brand assets including franchisees, imagery
instructions, product styling and range structure direction, packing and
merchandising guidelines, retail store architectural design structure,
technical developments, support in manufacturing assistance and training
to Lovable Lifestyles, as and when necessary.
Lovable Lifestyles will leverage on Lovables distribution network,
consumer knowledge and launch lifestyle product lines in the categories
and services of fashion apparel. Complete product lines that are
developed in the United Kingdom by Lifestyle Galleries would also be
made available to Lovable Lifestyle. We believe entry into the superpremium segment will augur well for the companys profitability.
Page 36
44.6
45
(%)
40
35.5
32.3
35
30
15.3
25
20
15
24.5
19.1
FY08
20.4
19.6
25.9
FY07
25.6
FY09
19.6
17.8
FY10
FY11
20.8
FY12E
20.1
FY13E
19.7
19.9
FY14E
Sales growth
Over the years, the company has consistently spent money towards
spreading its product awareness and creating a brand value. This has
yielded positive results, as is evident from the chart above. While
revenues increased at a CAGR of 25.8% during FY07-11, the advertising
and promotional spends increased by a CAGR of 26.6%. Going forward
also, the company plans to spend ~18-20% of its revenues towards
advertising and promotions.
Foray into exports to aid topline growth
The company plans to sell its products in overseas markets
that are similar to the Indian markets, which will further aid
topline growth
Going forward, Lovable plans to sell its products overseas. It holds the
rights to market the products in Nepal and Bhutan, other than India. The
company also plans to export its products to Sri Lanka, UAE and
Bangladesh to enhance its geographic reach. Hitherto, we have not
factored the same into our estimates. Any positive developments on
these fronts will lead to an upward revision of our estimates.
Enhancing distribution network to boost revenues
Over the years, Lovable has grown in size through acquisition of brands
Lovable (bought out from Lovable World Trading Company, US), Daisy
Dee (acquired from Maxwell Industries) and College Style (acquired from
Levitus Trading Limited, Hong Kong). Going forward also, the company is
open to acquiring or partnering with any company in the innerwear
segment. This move will enable the company to access newer product
segments and/or diversify into newer markets that have a large growth
potential.
Page 37
Over 60% of the companys raw material costs are related to cotton and
cotton yarn. An inability to pass on the impact of the increase in raw
material prices will have an adverse impact on the companys profitability.
Also, too many price hikes will take a toll on the volume growth prospects
of the company.
80
70
13.3
60
(| / kg)
12.3
16.9
18.6
18.7
12.2
50
40
30
20
51.6
55.0
FY06
FY07
59.7
56.6
FY09
FY10
43.8
68.8
10
FY08
20
18
16
14
12
10
8
6
4
2
-
(%)
Exhibit 68: Cotton and cotton yarn spread and impact on operating margin
FY11
18.0
15.4
16
15.0
(%)
13.1
13.8
12.2
12.4
12.1
FY12E
FY13E
FY14E
12
8
FY07
FY08
FY09
FY10
FY11
Page 38
Page 39
Financials
Sales to grow at a CAGR of 24.0% during FY11-14E
69.2
FY08
FY09
137.6
104.0
87.0
15.3
19.6
165.7
32.3
25.6
FY07
198.4
35.5
60.1
44.6
41.5
(| crore)
200
180
160
140
120
100
80
60
40
20
-
FY10
20.4
FY11
FY12E
Net Sales
FY13E
50
45
40
35
30
25
20
19.7 15
10
5
-
(%)
FY14E
48.2
59.2
66.1
109.4
150
71.4
40
120
90
86
102
105
122
119
FY11
80
97.7
149
FY09
87.2
100
(| per piece)
160
168
60
30
20
-
FY14E
FY13E
FY07
FY14E
FY13E
FY12E
FY11
FY10
FY09
FY08
FY07
FY12E
(pieces in lakhs)
120
180
124.7
FY08
140
60
FY10
Page 40
19.1
18.7
18.6
35
18.2
17.4
30
(| crore)
15
5
23.9
13.3
12.2
12.3
5.5
7.3
8.5
FY07
FY08
FY09
10
-
37.9
30.1
25
20
20
19
18
17
16
15
14
13
12
11
10
19.5
16.1
FY10
FY11
EBITDA
FY12E
FY13E
(%)
FY14E
Exhibit 74: Debt free status provides comfort for fund raising in the future
28
23.2
24
20.5
19.5
20
(| crore)
16
12.2
9.6
12
8
4
6.3 0.4
(4)
FY07
7.0
3.4
6.4
FY08
FY09
Debt
0.3
FY10
FY11
(0.7)
FY12E
FY13E
FY14E
Page 41
(%)
40
38.3
37.1
43.5
30
38.5
41.2
41.0
32.8
20
12.8
10
10.0
FY07
FY08
FY09
FY10
FY11
ROE
14.4
16.5
18.4
11.4
13.5
15.4
FY12E
FY13E
FY14E
ROCE
35
30
13.5
25
(| crore)
10
5
-
10.0
3.3
3.9
6.0
FY07
FY08
FY09
PAT
15
11
17.6
14.1
6.6
17
13
23.4
8.7
7.9
15.2
30.1
12.8
11.5
20
15
14.1
(%)
7
5
FY10
FY11
FY12E
FY13E
FY14E
Page 42
Valuation
We have valued Lovable at a 15% discount to Page Industries valuation
multiple considering the lower return ratios and marginally lower
operating margin. We have arrived at a target price of | 350 (based on
19.6x FY14E EPS of | 17.9. We are initiating coverage on Lovable Lingerie
with a HOLD rating. At the CMP, the stock is trading at 25.2x and 19.6x its
FY13E and FY14E EPS of | 13.9 and | 17.9, respectively.
Exhibit 77: Lovable Lingerie one year forward P/E chart
600
34.0x
30.0x
26.0x
450
22.0x
18.0x
300
Avg. Price
18.0x
22.0x
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
150
26.0x
30.0x
34.0x
FY08
FY09
FY10
FY11
FY12E
FY13E
FY14E
4.2
7.1
10.4
13.8
17.0
21.7
27.4
Add: Depreciation
0.3
0.4
1.3
1.4
1.6
1.7
1.8
(0.1)
(7.5)
4.7
14.6
(0.8)
5.9
8.9
Less: Capex
0.7
10.0
0.9
1.5
1.0
1.1
1.2
3.9
5.0
6.1
(1.0)
18.4
16.3
19.1
After growing at over 30% on a small base (FY07 and FY08), Lovable has
stabilised a sales growth rate of ~20%. Its presence in the womens
segment is an added positive as the womens segment is likely to
outperform the broad industry growth and also the mens segment
growth. However, we feel the positives are factored in the stock.
Page 43
Financial Tables
Exhibit 79: Profit & loss account
(| crore)
Net Sales
% Growth
Other Income
Raw Materials
Manufacturing & Admin Exp.
Employee Expenses
Sell. & Dsit. Expenses
Total Exp.
% Growth
Operating Profit
Depreciation
Interest expense
PBT
Tax
Prior Period Items
Net Profit
% Growth
Equity
Dividend %
EPS
FY09
69.2
15.3
0.1
28.6
6.0
9.1
17.0
60.7
15.2
8.5
0.4
1.4
6.9
0.8
6.0
52.9
1.5
10.0
19.1
FY10
87.0
25.6
0.1
43.2
2.8
9.3
15.4
70.7
16.6
16.2
1.3
0.9
14.1
4.2
0.3
10.0
66.8
7.5
10.0
14.4
FY11
104.0
19.6
0.9
49.2
3.3
11.6
20.3
84.5
19.4
19.5
1.4
0.5
18.6
4.4
14.1
40.3
16.8
15.0
8.4
FY12E
137.6
32.3
1.4
66.8
4.4
13.9
28.6
113.8
34.5
23.9
1.6
0.6
23.2
5.5
17.6
25.2
16.8
21.0
10.5
FY13E
165.7
20.4
2.8
80.1
5.4
16.8
33.3
135.6
19.2
30.1
1.7
0.5
30.7
7.3
23.4
32.4
16.8
27.8
13.9
FY14E
198.4
19.7
3.9
94.0
7.5
19.5
39.5
160.5
18.4
37.9
1.8
0.5
39.5
9.4
30.1
28.7
16.8
35.8
17.9
FY10
7.5
16.9
0.3
0.0
1.1
25.8
12.8
2.0
13.1
13.6
2.7
2.3
31.7
20.9
10.8
0.2
25.8
FY11
16.8
124.4
1.3
142.6
12.9
93.1
22.4
10.6
14.3
3.7
51.0
14.8
36.2
0.4
142.6
FY12E
16.8
137.9
1.5
156.2
12.4
95.3
25.6
16.6
27.5
5.5
75.3
26.8
48.5
156.2
FY13E
16.8
155.8
1.6
174.3
11.9
96.2
30.0
20.9
39.3
6.5
96.7
30.4
66.2
174.3
FY14E
16.8
178.9
1.9
197.6
11.3
97.5
35.9
24.5
53.0
9.7
123.0
34.2
88.8
197.6
FY09
1.5
13.2
3.7
2.7
0.5
21.5
13.2
1.0
13.5
8.7
2.0
9.1
33.4
26.0
7.3
21.5
Page 44
FY09
4.3
0.4
1.4
(1.3)
(0.1)
4.7
7.5
12.2
(10.2)
0.1
(10.2)
(0.7)
(1.5)
(2.2)
1.9
0.4
2.0
FY10
14.3
1.3
0.9
(2.1)
(0.0)
(0.0)
(0.1)
14.3
(4.7)
9.6
(0.7)
(1.0)
0.1
(1.5)
(6.1)
(1.1)
(7.2)
1.6
0.1
2.7
FY11
18.5
1.4
0.5
(5.6)
0.0
(0.1)
(0.9)
13.9
(14.6)
(0.7)
(1.5)
(91.1)
0.9
(91.7)
(0.3)
105.7
(1.4)
104.0
2.6
0.1
14.3
FY12E
23.2
1.6
0.6
(5.5)
19.8
0.8
20.6
(0.4)
(2.3)
(2.6)
(4.8)
(4.8)
14.2
0.0
27.5
FY13E
30.7
1.7
0.5
(7.3)
25.5
(5.9)
19.6
(0.8)
(0.9)
(1.7)
(6.2)
(6.2)
27.4
0.1
39.3
FY14E
39.5
1.8
0.5
(9.4)
32.3
(8.9)
23.4
(0.7)
(1.3)
(2.0)
(7.8)
(7.8)
39.2
0.1
53.0
FY09
47.1
10.0
15.0
FY10
61.0
3.9
13.1
FY11
58.2
3.9
13.8
FY12E
58.7
3.9
12.2
FY13E
59.0
4.0
12.4
FY14E
58.6
4.7
12.1
12.3
8.7
18.6
11.5
18.7
13.5
17.4
12.8
18.2
14.1
19.1
15.2
461.6
56.7
97.8
13.5
19.1
42.8
-
115.9
21.5
32.5
3.6
14.4
15.1
-
61.9
11.6
239.6
84.1
8.5
8.4
9.2
1.5
81.9
14.2
334.7
92.1
16.4
10.5
11.4
2.1
98.6
17.9
327.6
102.8
23.4
13.9
14.9
2.8
118.1
22.5
319.5
116.5
31.6
17.9
19.0
3.6
41.0
38.5
33.4
41.2
60.1
50.2
10.0
12.8
41.6
11.4
14.4
55.3
13.5
16.5
63.0
15.4
18.4
66.6
Page 45
FY09
12.2
5.0
21.1
0.4
0.3
5.9
0.8
FY10
9.6
6.1
24.7
0.0
0.0
15.9
0.0
FY11
(0.7)
(1.0)
141.2
33.8
-
FY12E
20.5
18.4
154.7
40.5
-
FY13E
19.5
16.3
172.6
57.2
-
FY14E
23.2
19.1
195.7
75.7
-
0.9
0.8
0.1
3.2
1.5
0.7
1.0
0.2
3.4
1.1
0.8
1.0
0.2
0.7
1.0
0.8
1.0
0.2
0.9
1.0
0.8
1.1
0.2
1.0
1.0
0.8
1.1
0.2
1.0
1.0
(YoY Growth %)
Net Sales
EBITDA
Net Profit
15.3
15.9
(31.1)
25.6
89.8
277.0
19.6
20.6
40.3
32.3
22.7
25.2
20.4
26.0
32.4
19.7
25.8
28.7
Turnover Ratios
Working Capital / Sales (x)
Inventory turnover (days)
Debtor turnover (days)
Creditor turnover (days)
Current Ratio (x)
0.1
79.4
39.0
101.8
1.3
0.1
55.8
46.9
81.9
1.5
0.2
62.1
42.5
36.0
3.4
0.2
68.0
44.0
60.0
2.8
0.2
66.0
46.0
55.0
3.2
0.2
66.0
45.0
50.0
3.6
7.1
0.4
(7.5)
10.0
5.0
10.4
1.3
4.7
0.9
6.1
13.8
1.4
14.6
1.5
(1.0)
17.0
1.6
(0.8)
1.0
18.4
21.7
1.7
5.9
1.1
16.3
27.4
1.8
8.9
1.2
19.1
41.9
20.7
3.9
4.2
33.4
23.5
4.1
0.4
3.8
25.2
18.3
3.3
0.6
3.4
19.6
14.2
2.7
0.8
3.0
Page 46
Initiating Coverage
March 29, 2012
Rating Matrix
Rating
Unrated
| 141
Net Sales
EBITDA
Net Profit
FY12E
12.0
23.9
19.2
FY13E
14.7
16.1
22.6
FY14E
13.6
19.8
26.1
FY12E
27.8
15.4
5.7
FY13E
22.7
13.2
4.8
FY14E
18.0
10.9
4.1
PE
EV/EBITDA
Price/BV
Stock Data
Bloomberg/Reuters code
Sensex
Average volume
Market Capitalisation
EV
52 week H/L
Equity capital
Face value
Promoter's stake (%)
1m
6.9
(9.3)
-
3m
10.3
11.3
(2.0)
6m
4.7
(24.6)
(7.7)
12m
67.2
38.8
NA
Price movement
6,000
225
5,600
150
5,200
75
4,800
4,400
0
Sep-11
Nov-11
Dec-11
Price (R.H.S)
Feb-12
Mar-12
Nifty (L.H.S)
Analysts name
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
Rupa & Company (Rupa), one of Indias oldest innerwear players, is well
poised for growth on the back of multiple factors ranging from increasing
share of premium products to increasing retail presence, to name a few.
With a strong brand portfolio (all owned by the company), Rupa has been
a leading player in the mid-level innerwear segment. On the back of
economic exuberance, the company is increasing its presence in the
super premium segment as well. The share of super premium products in
the overall mix has increased from 1% in FY08 to 7% in FY11, thereby
leading to an operating margin expansion of 227 bps to 10.6% during the
period. Going forward, an increased retail presence will further increase
the visibility of the brand.
Presence across all segments with self-owned brand portfolio
Apart from its flagship brands Rupa and Euro the company has
created various brands. As on date, the company manages over 2000
stock keeping units comprising different products ranging from mens and
womens innerwear to casual and thermal wear. Going forward, the
company can leverage these brands to introduce new products, either
under the same brand or in the form of brand extensions.
Retail expansion to fuel topline growth
The company plans to expand its retail presence through an asset light
franchising model. This will not only ensure lesser burden on the balance
sheet but also boost the topline growth for the company. We expect sales
to increase at a CAGR of 13.4% during FY11-14E.
Foray into premium segments to boost operating margin
Rupa has gradually increased the share of super-premium products to 7%
of sales in FY11. Consequently, the EBITDA margin has also increased
from 8.3% in FY08 to 10.6% in FY11. With increasing share of premium
and super premium products and stabilising raw material prices, we
expect operating margins to further increase to 12.5% by FY14E.
Valuations
At the CMP, the stock is trading at 22.7x and 18.0x FY13E and FY14E EPS
of | 6.3 and | 7.9, respectively. Considering the growth potential in
earnings due to the retail expansion and improving financials, the stock is
trading in line with its peers in this segment.
FY10
532.5
44.5
38.5
25.2
3.2
27.8
15.2
17.6
FY11
650.0
68.6
50.5
33.7
4.2
33.2
6.7
18.9
18.2
20.1
FY12E
728.1
85.0
60.2
40.2
5.0
27.8
5.7
15.4
20.2
20.5
FY13E
835.0
98.7
73.8
49.3
6.2
22.7
4.8
13.2
21.5
21.3
FY14E
948.6
118.3
93.1
62.1
7.8
18.0
4.1
10.9
23.8
22.6
Company background
Holding (%)
74.9
0.0
25.1
75
75
75
75
60
40
20
0
0
Q3FY12
0
Q2FY12
Promoters
0
Q1FY12
0
Q4FY11
Institutional investors
Rupa & Company was incorporated in 1985 by the Agarwala brothers. The
company has a comprehensive portfolio of product offerings in the
knitted innerwear, casual wear and thermal wear segment for men,
women and kids. Over the last six years, the company has consistently
received the Limca Book of Records for being the largest knitted wear
company in India. Rupa has a large number of stock keeping units (SKUs),
each of them for a particular brand, segment, colour and size catering to
customers of all age groups.
Over the years, the company has created over 10 sub-brands catering to
various socio-economic classes. Rupa owns a bouquet of leading knitted
innerwear and intimate wear brands with flagship brands like Rupa,
Frontline, Jon, Air, Macroman, Macroman M series, Euro, Bumchums and
Thermocot. The company caters to all segments across distinct product
categories covering the low, economy, medium, premium and superpremium categories.
Its product offerings include vests, briefs, drawers, brassieres, panties,
slips/camisoles and bloomers in the knitted wear segment. Its casual wear
product portfolio comprises T-shirts, shorts, bermudas, capris, loungers,
night sets and track suits. In the thermal wear segment, the products
include both thermal innerwear and outer wear.
The company primarily focuses on creating brands and has adopted an
asset-light business model by largely outsourcing the production of its
knitted products. It has a network of over 750 independent job work firms.
Of these, ~80% have been manufacturing products for the company for
the last 15 years. The company has a dyeing and bleaching facility at
Domjur, West Bengal to dye products meant for its premium and superpremium brands. The unit has a total bleaching and dyeing capacity of 30
tonnes per day (5 tonnes for yarn dyeing and 25 tonnes of fabric dyeing
per day).
The company follows the traditional style of distributing its products. It
has a network of over 950 dealers and distributors who supply their
products to over 1,00,000 retail outlets across the length and breadth of
the country.
Exhibit 85: Key milestones
Year
Milestone
1979
Promoters commenced business as Binod Hosiery, which lauched the Rupa brand
1985
1995
Took over the business of Binod and converted it into a Public Limited Company
1996
1997
1999-2000
2003
2005
2006
2010
2010
2011
Page 48
Investment Rationale
Rupa has created a diversified portfolio of brands to cater
to various ages and socio-economic strata of the society
Jon
Euro
Bumchums
Imoogi
Thermocot
Footline
Premium segment
Xing Macroman
Expando Softline
Showman Kidline
Interlock Footline
Air
Macroman M Series
Today, Rupa manages a portfolio of over 2000 stock keeping units (SKUs)
comprising different products ranging from men and women innerwear to
casual wear to thermal wear.
Page 49
20
20
19
19
45
43
42
40
37
34
33
32
34
FY07
FY08
FY09
FY10
FY11
17
75
46
(%)
50
25
Basic
Mid Premium
Premium
Super Premium
Page 50
10.6
70
8.2
8.3
7.5
10
8.4
(| / kg)
50
40
30
55.0
20
59.7
43.8
56.6
68.8
(%)
60
12
4
2
10
-
FY07
FY08
Spread (|/kg) (RHS)
FY09
FY10
FY11
Page 51
Financials
Sales to grow at CAGR of 13.4% during FY11-14E
Exhibit 89: Topline expected to grow at CAGR of 13.4% during FY11-14E
351.3
200
650.0
532.5
421.1
400
728.1
16.9
600
835.0
19.9
300.6
(| crore)
800
30
22.1
25
20
15
14.7
13.6
12.0
10
5
-
FY07
FY08
FY09
FY10
FY11
FY12E
Net Sales
FY13E
FY14E
0.6
300
FY07
FY14E
FY13E
FY12E
FY11
FY10
100
FY09
350
378
200
0.3
FY08
282
314
585
FY14E
0.9
400
492
541
FY13E
1.1
447
500
FY12E
1.5
FY10
1.1
1.4
(| per piece)
1.0
FY07
(pieces in crore)
1.2
1.4
FY09
1.3
1.5
600
1.6
FY08
1.8
FY11
Page 52
(%)
26.4
948.6
1,000
12.5
140
super-premium category
11.7
120
100
(| crore)
20
8.4
8.2
8.3
24.6
29.1
31.6
FY07
FY08
FY09
7.5
13
12
11
98.7
85.0
60
40
118.3
10.6
80
11.8
10
(%)
68.6
9
44.5
7
FY10
FY11
EBITDA
FY12E
FY13E
FY14E
6.7
70
60
4.7
50
(| crore)
40
3.3
3.3
5.5
63.1
3.4
33.7
25.2
9.8
11.6
FY07
FY08
40.2
20
49.9
30
10
5.2
6.0
(%)
operational performance
14.2
FY09
PAT
FY10
FY11
FY12E
FY13E
FY14E
Page 53
Valuation
The stock was earlier listed on the Calcutta Stock
200
24x
22x
20x
18x
16x
160
120
Avg. Price
16x
18x
20x
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
80
22x
24x
At the CMP, the stock is trading at 22.7x and 18.0x FY13E and FY14E EPS
of | 6.3 and | 7.9, respectively. Considering the growth potential in
earnings due to the retail expansion and improving financials, the stock is
trading in line with its peers in this segment.
Page 54
Financial Tables
Exhibit 95: Profit & loss account
(| crore)
Net Sales
% Growth
Other Income
Raw Materials
Manufacturing Expenses
Employee Expenses
Sell. & Admin. Expenses
Total Exp.
% Growth
Operating Profit
Depreciation
Interest expense
PBT
Tax
Prior Period Items
Net Profit
% Growth
Equity
Dividend %
EPS
FY09
421.1
19.9
1.7
203.3
86.7
2.6
96.8
389.5
20.9
31.6
3.1
8.0
22.2
7.9
14.2
22.6
8.0
49.9
1.8
FY10
532.5
26.4
3.4
254.9
116.1
3.3
113.7
488.0
25.3
44.5
3.6
5.8
38.5
13.3
25.2
76.8
8.0
64.9
3.2
FY11
650.0
22.1
1.3
302.1
134.5
4.9
139.9
581.4
19.1
68.6
4.7
14.8
50.5
16.8
33.7
33.8
8.0
99.9
4.2
FY12E
728.1
12.0
1.8
345.8
143.8
5.7
147.8
643.1
10.6
85.0
6.2
20.4
60.2
20.1
40.2
19.2
8.0
126.1
5.0
FY13E
835.0
14.7
2.2
391.4
162.8
6.7
175.3
736.3
14.5
98.7
7.8
19.2
73.8
24.6
49.3
22.6
8.0
154.6
6.2
FY14E
948.6
13.6
2.6
445.8
180.2
7.9
196.4
830.3
12.8
118.3
9.6
18.1
93.1
31.0
62.1
26.1
8.0
195.0
7.8
FY10
8.0
135.3
124.8
7.1
275.2
59.5
28.8
6.0
127.7
104.3
6.9
25.6
264.6
83.8
180.8
275.2
FY11
8.0
159.7
184.0
11.4
363.1
108.6
4.0
0.0
235.6
102.2
7.4
22.7
368.0
117.5
250.4
363.1
FY12E
8.0
188.2
194.3
12.1
402.6
114.9
4.7
1.3
243.4
119.7
4.9
27.3
395.3
113.5
281.8
402.6
FY13E
8.0
223.0
192.0
13.2
436.2
122.5
6.1
1.5
253.9
139.5
7.6
31.7
432.9
126.7
306.2
436.2
FY14E
8.0
266.9
181.5
14.7
471.1
128.0
2.4
7.6
278.1
150.7
7.4
35.1
471.3
138.2
333.1
471.1
FY09
8.0
115.5
47.9
3.3
6.6
181.2
51.6
5.5
5.1
64.8
73.5
4.9
31.5
174.7
55.7
119.0
181.2
Page 55
FY09
22.1
3.1
7.6
(6.1)
(1.3)
0.4
25.9
(5.4)
20.4
(13.3)
(5.0)
1.0
(17.3)
(60.0)
67.5
(9.1)
(1.6)
3.3
4.9
FY10
38.5
3.6
5.3
(11.6)
(3.0)
0.3
33.1
(58.8)
(25.8)
(34.9)
(0.9)
3.4
(32.4)
70.2
(9.9)
60.3
4.9
6.9
FY11
50.5
4.7
13.6
(14.2)
(1.0)
0.3
53.9
(71.3)
(17.4)
(29.0)
6.0
0.8
(22.2)
59.2
(19.1)
40.1
6.9
7.4
FY12E
60.2
6.2
20.4
(20.1)
(1.8)
65.0
(40.6)
24.4
(11.9)
(1.2)
(13.2)
10.4
(24.1)
(13.7)
7.4
4.9
FY13E
73.8
7.8
19.2
(24.6)
(2.2)
74.1
(27.9)
46.2
(16.8)
(0.3)
(17.0)
(2.3)
(24.2)
(26.5)
4.9
7.6
FY14E
93.1
9.6
18.1
(31.0)
(2.6)
87.3
(36.0)
51.3
(11.5)
(6.1)
(17.6)
(10.5)
(23.4)
(33.9)
7.6
7.4
FY09
FY10
FY11
FY12E
FY13E
FY14E
52.2
22.3
0.7
52.2
23.8
0.7
52.0
23.1
0.8
53.8
22.4
0.9
53.2
22.1
0.9
53.7
21.7
0.9
7.5
3.4
8.4
4.7
10.6
5.2
11.7
5.5
11.8
5.9
12.5
6.5
52.9
4.0
146.3
15.5
0.6
1.8
2.2
-
66.9
5.6
155.3
18.0
0.9
3.2
3.6
-
81.6
8.6
162.7
21.1
0.9
4.2
4.8
1.0
91.4
10.7
164.3
24.6
0.6
5.0
5.8
1.3
104.9
12.4
163.7
29.0
1.0
6.2
7.2
1.5
119.1
14.9
162.4
34.5
0.9
7.8
9.0
1.9
11.5
16.3
8.6
17.6
15.2
9.9
20.1
18.2
9.8
20.5
20.2
10.5
21.3
21.5
11.9
22.6
23.8
14.1
32.0
2.7
174.6
0.4
0.3
3.5
1.6
44.7
(63.3)
268.0
0.9
0.5
7.0
2.8
68.1
(53.0)
351.7
1.1
0.5
4.3
2.7
85.0
6.3
390.5
1.0
0.5
3.9
2.3
98.7
23.8
423.0
0.8
0.5
4.7
1.9
118.3
34.7
456.4
0.7
0.4
6.0
1.5
Page 56
FY09
0.6
0.8
0.1
2.3
1.5
FY10
0.7
0.9
0.1
1.9
1.9
FY11
0.7
0.8
0.1
1.8
2.2
FY12E
0.7
0.8
0.1
1.8
2.1
FY13E
0.7
0.8
0.1
1.9
1.9
FY14E
0.7
0.9
0.1
2.0
1.7
19.9
8.5
22.6
26.4
40.7
76.8
22.1
54.3
33.8
12.0
23.9
19.2
14.7
16.1
22.6
13.6
19.8
26.1
Turnover Ratios
Working Capital / Sales (x)
Inventory turnover (days)
Debtor turnover (days)
Creditor turnover (days)
Current Ratio (x)
0.3
67.5
55.1
41.3
3.1
0.3
66.0
61.0
33.8
3.2
0.4
102.0
58.0
40.5
3.1
0.4
122.0
60.0
50.0
3.5
0.4
111.0
61.0
48.0
3.4
0.3
107.0
58.0
45.0
3.4
18.3
3.1
5.4
13.3
2.7
26.8
3.6
58.8
34.9
(63.3)
42.7
4.7
71.3
29.0
(53.0)
52.6
6.2
40.6
11.9
6.3
60.6
7.8
27.9
16.8
23.8
72.5
9.6
36.0
11.5
34.7
Valuation Ratios
Price to earnings ratio (x)
EV / EBITDA (x)
EV / Sales (x)
Dividend Yield (%)
Price / BV (x)
36.9
2.8
-
27.8
2.3
-
33.2
18.9
2.0
6.7
27.8
15.4
1.8
0.7
5.7
22.7
13.2
1.6
0.9
4.8
18.0
10.9
1.4
1.1
4.1
Page 57
RATING RATIONALE
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