“Good Bye” is hard to say, but I have come to a point where holding 10% allocation to Page has become difficult. Company continues to do well and doesn’t have a history of trading cheap in terms of trailing/forward PE ratio.
But am ready to say thank you and move on. A difficult decision and i know people who have regretted such decisions on page in past.
allocation reduced to <3% and might sell more.
Regards
RajPanda
Hi @pavankumar ,
Valuation is the single reason. Not that I used any complicated model to say it’s over valued.
But in very simple terms, here is what I am thinking (not my original thinking).
If we assume a “picture perfect” scenario that Page can grow it’s earning at 30% for next 10 years.
Then 10 years from now, it’s earnings will be at 2426 per share (compounding 175 for 10 years at 30%).
With a simple assumption that, the growth visibility will moderate beyond 10 years period, then share could trade say at 20x multiple on then earnings i.e., 2426*20 = 48520 price per share.
At current price of 15,000, the returns with above “assumption” comes to ~13% per annum for next 10 years. Dividend will add 1-2% more to the returns.
But then 30% growth for next years is a big assumption !! ?
On the downside, let’s assume, 10 years from now, market likes Page, as well as it likes today, and value it at 85x trailing earnings making share holder return also match 30% cagr growth in eps.
The question is, on which side the odd is higher ?
@Raj: I am in agreement with all overvalued debates on Page. Only fault I see with the discussion is people seem to assume 20X as exit multiple. If Page compounds by 30% for next 10 or even 5 years, thats not going to be the case. At that stage, it’ll be dominating Indian inner ware market even more than it is today. And it will be a giant, something on lines of Peter Lynch Stalwart.
Now look at all such companies in Indian market today. Asian Paints, HUL, Nestle. All of them trade at PE of 35-40+ consistently (Even in bear phase of 2011-13). So for Page, I think exit multiple should be 35 or 40 in best case.
Of course in average or bad case the things are not looking up. But again, which company gives us comfort of investing large % of folio at current valuation, give stellar returns and still be at peace?
In my personal opinion, my portfolio is overvalued by 40-60% right now. And I am expecting just 15% CAGR in next 3-5 years including a market crash.
Disc - Page still is largest holding for me.
I somehow tend to agree with Raj.
Given the current market of about ~16,600; if you expect the stock to deliver 30% CAGR return over the next 10 years, market cap in 2020 would be ~2,30,000 crores.
I wont say the Company cant achieve this, but the probability of trading at a multiple of 85x at such high market cap is quite low.
Disc: 10% of my portfolio comprises Page.
I wish I knew better about exit multiples.
Each of the example like Asian Paints, HUL, Nestle could have a different reason to hold such high multiples currently. Need to consider case by case. At the same time, one can think about ITC, market is probably figuring a lower growth rate for it’s core business and the multiples have already shrunk over last ~2 years, while the company has been posting around ~18 earnings growth, price has stagnated over last 2 years to reflect the lower multiples.
But yes, i understand the exit multiple is open to debate.
By the way, even at 40 exit multiple the return from here is only ~21% cagr. Nothing earth shattering but yes, good compounding engine.
I might consider buying again in future.
Regards
RajPanda
Every two years, we have a sell discussion on Page, I sold few months back and it continued to rise. I think this time the sellers might be right considering everything we discussed above 
Page Ind JV with Jockey Brand till 2030, so until this time it won’t effect. Once should keep watch on working capital, as working capital is heart of any company, it can make or break the company.
Page has many growth drivers…I heard they are relaunching kidswear. They are transforming themselves into a lifestyle company rather than an undergarment company. Metros are saturated but tier 2/3 cities have huge potential. If we are looking at urbanization as a theme then Page is going to be one of the winners.
Also Speedo, which is still in fancy will be much bigger in next 5 years.
Page can comfortably grow north of 30% for next 2-3 years. I will hold till the growth remains and will sell only when the sales growth disappoints for 2-3 quarters.
Btw… It has been a 25 bagger for me.
Hi, Amitayu…may I know how many stocks do you own in your super concentrated portfolio…??
I own 3 stocks which comprising of 68% of my portfolio, Rest 32% are of 4 stocks.The 3 stocks are Page,Ajanta and HFC basket (Repco,Canfin). In page thread we will not discuss about portfolio. I will open a separate thread regarding my portfolio later . I learned a lot of things from this forum specially thankful to @hitesh2710 .
A counter view on Page:
This counter view was raised by a senior investor . Though I Do not agree to it, this counter point has not been raised previously.So it merits a discussion.
Counter view : " The consistent 30% sales/PAT growth of Page industries could be because of its aggressive new franchise openings. Every new franchise must have a mandatory level of stock initially(must be upward of 10lakhs). This stock could be accounted as a sale in Page’s books. This artificially boosts up its numbers. So this growth may not be austainable. This strategy was taken up TTK in its 2008 expansions. Markets punished the stock when it came to light. Page could suffer the same"
I personally do not believe that is the case. In recent years lots of Page products are even seen in low value, mom & pop type stores. I feel its because of demand and good distribution capabilities rather than demand less growth(counter view).
Please provide your inputs on this counter view. Any knowledge on performances of new franchise stores ? The basic agreement on which franchise owners work? Are aggressive franchise openings hurting the existing ones?
Disclosure: Page forms 40% of my portfolio.
This is not a attempt to create panic of any sort. I felt every counter view of merit must be analysed and dissected.No better place than VP to do that. It will help to develop conviction to hold on to the stock.
Seniors , hitesh sir please provide your views.
Thank you.
I am not a senior. the key differences between ttk and page
hi sreenath
this is just an information.Last year page opened a franchisee in my city.according to franchisee owner his initial stock was more than 20 lac and now it is increased 20% in one year and this phenomenon is expected to continue for coming 3-4 years as product range of company is increasing day by day.This increase in stock every year will help page to get a sustainable growth.this franchisee is doing sales as expected by franchisee owner.
Thanks for the info. This asset light franchisee led growth has been good for page. If the franchisee had adequate returns for his investments like the previous example its a good healthy trend.
My worry was this
Opening multiple franchise stores in the same locality. It would reduce the franchisee’s return? & make stores unviable?
aggressive store opening in less than ideal retail locations(run down ,shanty locality)
“This aggressive store openings and growth is not sustainable” is the counter view.
My view is that ,there is still lot of unmet demand in India for Jockey and this high stores led growth is sustainable.
I understand there is no black & white answer for future growth sustainability. But info such as one provided by anishanish and any management speak on this issue will help to connect the dots . To get a picture on how future growth will be sustained.
Please share your inputs and views.
Thank you.
Every few quarters, there will be a report on SELL on Page and initially there is a knee jerk reaction and over time it bites the dust. Over the past few years this has been the tradition. some time back too there was a sell call and I think it was axis capital or icici guys (dont recall exactly who but I think the price then was around 7000 or so.
Coming to current valuations, I assume that due to low cost cotton inventory, Page might benefit in fy 16 and provide net profit figures higher than sales figures. Provided management does not spend all excess profits into advertisements and brand building. But even considering a 50% rise in net profits for fy 16, we get an eps figure of 260-270 for fy 16 and page is quoting well above 50 PE on those estimates. So it will undergo the usual time correction without giving up too much in terms of absolute value. But in these time corrections the stock manages to find a comfortable range of say 1500-2000 Rs where it will keep oscillating till earnings catch up.
Coming to the theory of stocking up new sales with inventory and counting it as sales, I would be concerned if the new store owners would start crying foul and give feedback that they are stuck with the inventory. But on inquiring the old store guys I get the feedback that the products of Page are moving off the shelf at the usual fast pace.
This is a basic risk in any dealer based business, but at the same time the opportunity to grow a business. As the saying goes “the dealer might be weak link in the business model”. Sell In vs Sell Out being the differentiating factor.
Though the feedback has not been negative on ROI for the outlets, which is driven strongly on the brand strength. A scuttlebutt would throw more light especially on the situation of the newer outlets.
Page is a wonderful business with more than 60% RoE and high consistency in its performance. Those who are worried about its valuation will have to ask the question: How many businesses in India are growing at more than 30% with sound financial parameters like RoE, debt/etc. Further, if HLL can quote at 3 times growth, why not page? From the retail seller of the products of page, I get the feedback that page is launching many more products in near future and he sees huge demand for its products. Discl: Holding it since 2009.
Concensus estimate is around 235 for fy16.
You are right. i too look at that way. actually you are wrong in PEG details. hul, nestle and most of the other stalwarts are trading at about 5 times the growth. not 3.
btw the annual report is out. i was looking at the shareholding pattern. the CFO pius held 213 in the beginning of fy. he bought single or two shares in 5 transactions. 
sold 50 in one transaction. ends the year with 171 shares. i find it very strange. cfo must be knowing better than the rest right?. this always confuses me. ( i know that there have been numerous discussions about promoter selling. but still their stake is very high. but here i am talking about cfo holding only 171 shares :))
