Excellent results…Company exhibiting higher growth with increasing profitability year after year…return ratios look pretty healthy…
Highlight of certain key balance sheet items…business generates significant cash, so not much of an issue - debt has increased from 88 crore to 142 crore…Inventory days has increased from 204 days to 234 days (on COGS)…
Good initiative by the management to announce additional interim dividends…
great set of results. anyone having breakup of volume nd value growth ? plz share. thanks
Volume details will be out in the AR if i’m not wrong
I think analysing all the finer details of Page Inds could be a good academic exercise but for all practical purposes, this is a juggernaut which keeps rolling on at 30-35% cagr with high div payout. Key remains to keep buying when there are sharpish corrections as when it fell down from 6700-6800 levels to 5600-5700 levels.
agree with you Hitesh 
but still i love to look at page numbers . i got the volume break from Dolat capital research report…following are the segmental volume growth: men: 9.4%, women 29.1%, leisure wear: 26.6%.
realisation growth: men: 13.9%, women: -1.1%, leisure wear 27.6%.
Try this :
Current EPS : 140
Modest Projected Growth Rate for next 5 year : 25% (Mind u, past many quarters it has been growing at 40%+)
Assuming a 5% growth thereafter : (Easy for a good brand, with pricing power)
Discount Rate of : 9%
Let me know the Fair Value with these projections. We can then decide whether to buy Page or not…
Tip : I buy in SIP, and at every downfall…Using this approach I have made it the largest holding in my portfolio
Ashwini,
5% terminal growth is a HUGE assumption as that in itself in 98% of the value.
I would rather check the growth that the market is currently pricing in Page. My reverse DCF indicates that at this price, Page is supposed to grow at 25% for the next 7 years and then a 2% terminal growth (with 9% discount rate).
Now, people who think they can achieve 25% cagr or less over the next 7 years should not buy more. People who think they can achieve more than 25% cagr over the next 7 years should obviously buy.
Near term growth (over the next 2 years) of say 35% and 25% subsequently would put the fair value at Rs.7700/-. I personally use such reverse DCF in predictable earning stocks like Page to find some comfort in investing/not investing decision than broad assumptions.
Kiran, I agree with the 5% Terminal Growth.
Actually ideal formula for valuing Page would be a 2/3 Stage Formula, where u factor 35% growth for next 3-4 years, then a tapered growth of 20% for next few years.
For Terminal Growth, its a bit tricky - They have pricing power and can easily take price hikes of 5% upwards every year.
Key Facts w.r.t Page :
1). Page’s entry level men’s undergarments are cheaper than Lux/Rupa
2). Almost all International Brands have come to India, tested the market and gone back. Only CK remains in the super premium segment
3). If you carefully observe, they have a farely stable Operating Margin between 19%-21%, anything above this which they earn is pumped into Brand Building/Advertising. So all those who worry margin contraction in Page in the near future, should remember that they have a buffer margin always available in Marketing Costs. If RM Prices go up, they will cut advertising to some extent to manage margins for the year.
4). Being a good brand, they never take price cuts whenever RM prices drops, the profit directly goes to their kitty. Infact through the year, Page never offers a discount (not even when the whole of Mall is on Sale)
5). We are yet to factor in the growth of Speedo , Kids and Ladies Undergarment Section. Ladies segment is far more unorganized and presents a great scope. At the cost of repetition (Ladies Segment Revenue of Page is greater than Annual Turnover of Lovable)
3 times in 10 years is a very modest target. Just 12% compounded. Page will grow much faster than that.
First of all buying 1 share @20K or buying 1000 shares at Rs. 20 are same. You need to remove that mental block. Look at MRF where the share price is 22,000. There are decent trading volumes.
My 2 cents
This is a 30% cagr compunder, byt it looking richly valued @57 PE@7800 now, it captures next 2 yr earnings for sure, fair pe shud be 35-40 i think, may be time take some profits off the table.
q1 fy 14 was a v gud Q and pat of 42 cr is high base effect, so q1 no. may not be spectacular as well( may surprise again), seems like 20-25 % pat growth in q1fy15.
now some gud also in budget as excise has been cut on following items
**Certain apparels **(active-wear, gloves, hosiery, leggings, skinny jeans, skinny jeans, swim suits, undergarments, etc.)-- reduce the basic customs duty (BCD) on inputs for manufacture of spandex yarn from 5 percent to Nil.
LAst time co didnt pass on the excise cut to customers as per jockey dealers and helped inc margins etc, they may do the same this time again.
valuations r really getting strecthed.
seniors and other comments pls
Bad idea to take some profits off table. The stock is doing good, the company is doing good, the sentiments are good. If you really want to sell it then you should do that when the topline starts declining and not because “valuations are getting stretched”.
Some good insights in Page AR:
Indian textile and apparel market - 5.7 lakh crore. (Domestic market - 3.54 lakh crore,Exports - 2.16 lakh crore)
(Rs in crores)
| Type | 2013 | 2023 | CAGR |
|---|---|---|---|
| Indian Inner-wear market | 17750 | 59540 | 13-14% |
| Men's wear | 6870 | 15000 | 9% |
| Women's wear | 10880 | 44000 | 15-16% |
| Kids wear | 45220 | 123,030 | 10-11% |
| Leisure wear(T-shirt) | 5980 | 17500 | 12% |
Revenue share
| Segment | share |
|---|---|
| Men | 50% |
| Women | 18% |
| Leisure | 30% |
| Swimwear | 2% |
Total sales for the year were Rs 1173crores.
"During the period under review, we have expanded our installed capacity to 162 Million pcs per annum across our various units spread over 1.7 Million square feet in 17 locations in the state of Karnataka. The company has set a medium term target to enhance the installed capacity step by step to 230 Million pieces by December 2015.
The Company is in the process of setting up two more factories; one at the 4 acre land allotted by KIADB at Gowribidanur, Karnataka. This plant will have a production capacity of 15 million pieces per annum. The other factory located at Tiptur in Karnataka will have a capacity of 10 million pieces per annum. A further plant is being planned in Hassan with a capacity of 4 million pieces per annum."
The company's forgein exchange revenue stood at 3.8 crores from exports to Srilanka, UAE and Nepal. (huge oppurtunity to expand here too).
Hi Krishna,
I think most of us would have received the AR in the evening today and you have already read the AR. Hats off to your commitment.
My simple analysis of future earnings for Page of next 10 years based on industry size and growth (as per the AR). It may look conservative from the growth perspective on a standalone basis but I’m trying to look at the industry size and the market share of Page. To keep it simple i’ve not factored the export potentials, the capex requirements etc but factored some of that in PAT margins.
Based on the estimates, one can expect around 9% CAGR returns for next 10 years which i think is low. It also doesn’t provide much margin of safety. However the real returns may be much higher if people continue to drive up valuations (which is the speculative aspect) but that does not change the real underlying earning potentials.
We need to focus more on the underlying earnings of the company rather than the current valuations and re-ratings of these valuations.
Disclosure: Invested.
Page-Future-earnings-potentials.xlsx (49.9 KB)
hi punit,
in 2014, sales grew by 35.9% and you have assumed it will be 20% next year. any reason ?
@Punit. Thanks for putting the detailed calculations. It gives a good framework for calculating the future earnings.
Some counter points:
1). Investing seems to be so easy with an excel sheet but it isn’t. After all a tool need the correct input to give the right output.
2). Your assumption of 20% growth is too low. It should grow north of 30% for at least next 3 years. They are increasing the production capacity by 42% in next 18 months. That itself is a big indicator of what is coming.
3). Speedo can be big in next 5 years.
4). Dividend payout ratio is declining which means they have more money for expansion, branding etc. refer AR
5). All the assumptions are linear. Like 0.4% market share growth etc…
Finally, I feel that your price target for 2024 will be met by FY16 end. I am expecting a doubler even from here in next 2-3 years.
PS: I am holding it from a very low price and hence views may be biased.
Bala - I’d avoid looking simply at historical figures and gauge the future growth trajectory. It is always more difficult to grow at the same pace with a bigger base. I’m looking at the industry growth rate of 13% and adding 0.4% market share thereby expecting Page to outperform the industry.
1).
**You are spot on Raj. I’m not looking to create complicated analysis but just to understand predictable earnings of a company which forms the core of my investing. Of course i may be completely wrong on all inputs but I need some sense of predictable earnings to estimate the company valuations and margin of safety.**2).
Yes, you may be right on next 1-2 years growth. I’d like to understand the earnings over a much longer period and I’d be very skeptical to believe that they can grow around 30% CAGR for next 10 years. Also please look at volume growth vs. price growth. In terms of volume they grew 16% last year and rest came from price increases. I don’t think they can keep raising prices, so they will have to push for a higher volume growth which is always more challenging and puts pressure on margins.
**
**
3).
**You may be right again but that is just a prediction as good as saying Brazil will win the next cricket world cup.**4).
**Yes, it is a great thing. For a company like Page that can generate such high returns on capital and equity, they should reinvest all the money back into the business. I’d prefer no dividend from this company. Lower dividend should improve the BVPS but that does not change the earnings.**5).
I’m just keeping it simple. You may change that but overall I’m expecting them to grow faster than the industry and keep grabbing market share. Again you may very well be right and I sincerely hope so. However if it does, then it will be the factor of speculative part of the valuation rather than core earnings. Important question is would you be ready to buy the whole company at that stretched valuation or would you be ready to hold Page if the stock market closed down for 10 years. Probably not. You can only those questions by looking at the core earnings rather than market valuations.
their historical sales growth for last 4 years 36, 26, 39,45. if they grow only by 20% next year how will market assign PE of 52 ? it will crash to around 35.
I agree its difficult to keep the same pace as the base keeps increasing. but it will be slower and smoother than what you have assumed imho.
Bala - As prudent investors, we should be looking at company’s predictable earnings and growth, and then apply the right valuation to it rather than looking at market valuation to predict the company growth.
Even if we assume that the high PE is an indication (rather an expectation) of the company’s high growth rate, then the valuation has already factored in the future growth leaving no margin of safety. So would you add at current valuations?
Always remember “it is better to be roughly right than precisely wrong”
Anyway I hope you are right that the company will grow at a much higher and faster pace, as all of our interests are aligned
