FRA Group Assignment 2

Textile Industry

ACADEMIC GROUP 12

Aditi Ravi PGPM 22 003

Gunatav Kapoor PGPM 22 028
Prince Kumar Jain PGPM 22 047
Somesh Kumar PGPM 22 066

1
 Textile Industry Overview
Industrial revolution synonymous to birth of textile industry

Textile Industry Product Category

Apparel constitutes ~73% share of the total

Fibre Yarn Fabric Apparel Home Textiles T&A market in India

Market Structure for Apparel Market

World India
Market Size ($) 1.5 Trillion 99 bn
(FY2122) 60%

Expected CAGR 4% 10% 40%

(%) - 2025 50% 50%
80%

• China was the largest exporter in 2020 with a global trade 20%
share of approx. 38%
• Vietnam was 2nd largest T&A exporter while Bangladesh
Men wear Women wear Overall
was the 2nd largest apparel exporter in 2020 Organised Unorganised

India one of the most scattered retail markets in the world

India is the 6th largest exporter with US$ 29.6 Bn exports Source:- Wazir
 Innerwear Industry Overview
The Inner wear sales is an economic indicator “men will forgo buying new underwear during a recession”

PAGE INDUSTRIES LUX INDUSTRIES

Details Sup
er
Pre
B2C miu
Company Type B2C m
Premium
Innerwear, Swim Inner wear, thermal
Products wear (Speedo,
wear, etc
Athleisure

Economy, Mid Economy

Mid Premium &
Customer Segment Premium &
Premium
Premium

Other Retailers & Other Retailers & Unorganized Segment

Distribution Channel
EBOs EBOs

Customers Segments and Brands

Salient Features of Textile Apparel Industry
TYPICAL ASSET PROFILE OF MOST PEERS IN THE INDUSTRY

PAGE vs INDUSTRY NON-CURRENT

ASSETS; 39%

CURRENT ASSETS; 61%

CURRENT ASSETS NON-CURRENT ASSETS

• Inventories and receivables form

LUX vs INDUSTRY
a major chunk of assets
• Key metrics to analyse:
Working capital days ,
Asset Turnover
 Salient Features of Textile Apparel Industry
PAGE vs INDUSTRY
TYP ICA L MA RGIN S A N D EXP EN S ES (COMMON
S IZED ) OF MOS T P EERS IN THE IN DUS TRY

NET INCOME
3%
TOTAL EXPENSES
97%

TOTAL EXPENSES NET INCOME

LUX vs INDUSTRY

• Industry marked by very high

operating expenses with COGS
being the major contributor
 Salient Features of Textile Apparel Industry
PAGE vs INDUSTRY
TYPICAL PEERS/INDUSTRY CASH
FLOW

NET CASH FLOW

Net cash flow from FINANCING activities

Net cash flow from INVESTING activities

Net cash flow from OPERATING activities

-80 -60 -40 -20 0 20 40 60 80 100 120

LUX vs INDUSTRY

• Very cash strapped industry

• Ability of company to fulfil short

term obligations must be
checked
Lifecycle of Companies

Source Concept & Credit:-Aswath Damodaran

7
P Operating Revenue Operating Revenue L
A 4,000 2,000 U

INR Crores
INR Crores
G -
FY FY FY FY FY FY FY FY FY FY FY FY
-
FY FY FY FY FY FY FY FY FY FY FY FY X
11 12 13 14 15 16 17 18 19 20 21 22 11 12 13 14 15 16 17 18 19 20 21 22
E
Net Profit Margin Net Profit Margin
16 20
I
I 14
12
10 N
N 10
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22
-
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22
D
D Asset Turnover Ratio Asset Turnover Ratio U
U 2.50
2.00 2.00
S
S 1.50
1.00 1.00 T
T 0.50
- -
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22
R
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22
R Debt/Equity Debt/Equity I
I 1.00 5.00 E
0.80 4.00
E 0.60 3.00 S
0.40 2.00
S 0.20
-
1.00
-
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22

Traversing from High Growth to Mature Growth to 8

Mature Stable Traversing from Young Growth to High Growth

 Revenue from Sales Performance Evaluation Net Profit Margin
3,886.00
15.01
14.1 13.8
Page; 2,945.00 2,832.00 12.02
11.65 Industry average:-
10.85
12
2,273
Lux; 1,664
Industry average:- 1808
1,938

FY 2020 FY2021 FY2223

FY 2020 FY2021 FY2223

Operating Profit Margin Return on Equity

20.84 49.28
19.69
18.08 41.86
16.28
Industry average:-17
38.48

27.07 25.93 Industry average:-

24.34
25

FY 2020 FY2021 FY2223 FY 2020 FY2021 FY2223

 Return on Capital Employed Performance Evaluation
Working Capital Days
68.06
58.56
54.59 197
167

33.97
29.27 124
27.42

47
36
14
FY 2020 FY2021 FY2223

FY 2020 FY2021 FY2223

Interest Coverage Ratios Debt to Equity Ratio

36.09 35.33 0.29

0.23
25.05
Industry average:-18
16.25 Industry average:-
14.65
12.89 0.1 0.15

0.03
0 0
FY 2020 FY2021 FY2223
FY 2020 FY2021 FY2223
 DuPont Analysis
3 ways to increase ROE:
1) Increase Margin 2) Increase Efficiency 3) Increase Leverage
Asset Turnover Leverage Multiplier
Profitability 3.9
13.8
1.94
1.92

3.5

PAGE 12.02

%
%

11.65 3.3
INDUSTRIES Asset
1.85

Profitability is Turnover is
increasing declining
FY2020 FY2021 FY2022
FY2020 FY2021 FY2022
>Positive > Negative
FY2020 FY2021 FY2022

Impact ROE impact on

Profitability (NPM) Assest Turnover ROE Leverage Multipler
15.01
14.1 3.06
2.1
1.8
10.85
1.6
1.92
LUX
1.26
INDUSTRIES
%

%
FY2020 FY2021 FY2022 FY2020 FY2021 FY2022 FY2020 FY2021 FY2022
 Return on Equity

49.28

41.86 PAGE INDUSTRIES

38.48

27.07
ROE

24.34 25.93
LUX INDUSTRIES

FY 2020 FY2021 FY2223

FY2022
 Investment Recommendations
PAGE INDUSTRIES LUX INDUSTRIES
PE Multiple PE Multiple
120 25
99.29 19.23 19.3
100 89.79 20
80 Sector PE 15.72
15
60 55.13 38.93
10
40
20 5

0 0
2020 2021 2022 2020 2021 2022

Dividend Payout % 20 18.86 Dividend Payout %

18
90 81.87
80 Attractive 16
70 62.36 14
60 52.32
Dividend 12 10.57
50 Pay-outs 10
40 8
30 6
20 4
10 2 0
0 0
2020 2021 2022 2020 2021 2022
 Other Recommendations
LUX INDUSTRIES

• Increase Asset Turnover Ratio – Excellence in Manufacturing by sweating assets

• Liquidity - Strive to become Debt free
• Strive to be consistently cash positive
• Increase Brand Presence, especially in South India

PAGE INDUSTRIES

• Venture into Tier 2 & 3 cities

• Debt Free makes it attractive for Investors
• Establish factories in Northern, Eastern & Western India for advancing supply chains

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THANK YOU

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