Time to ask one very fundamental question, especially to the junta who’ve been invested for some time and know the story well -
How is it that Page is running at such a low receivable days though they are more or less pursuing the same distribution strategy as others? Page runs at receivable days < 30 (this has been the case for more than 10 years) while all others are running at close to 3.5X that period. Or is there something unique about their distribution mix?
By the looks of it most of the product is being sold on the outright sale model to distributors, how is company able to get such favorable terms from the channel? In terms of inventory holding Page more or less tracks the industry which means the inventory days at the distributor and retailer end for Page products has to be way lower than everyone else. I cannot think of any other reason why channel is willing to pay money upfront. It is like the distributor is saying - “I know the product will fly off the shelf within days for me, hence my inventory carrying cost is minimal. I do not mind paying Page industries up front where as with all other players I will take upwards of 2 months to sell the consignment hence I am not willing to live with the inventory carrying cost”
While the rest of the positives of the business have been discussed here, looks like the ability to manage the inventory well at the channel end is what is makes Page a darling of the channel too and thus able to get better credit terms. Has any research report covered this aspect in detail? Also any questions the junta here has been able to pose to the management on this aspect? My sense is that their technology integration for the channel must be outstanding, else there is no way one player can be so efficient than the rest of the competition.
Another key variable to watch going forward would be this -
As proportion of women’s inner wear increases, logically the inventory levels needs to go up since women’s segment has higher SKU’s - greater variety of styles, colors and sizes. To what extent will this get counterbalanced by the outsourcing model that the company is now focusing on? Even there only labor intensive tasks get outsourced (discrete manufacturing part) while the process manufacturing part where scale can work in your favour gets done in house. This is common across other players like Dollar, Lux & Rupa too.
One thing that stands out is the willingness of Page to take on the women’s inner wear segment in a big way, looks like they are the first player to get to 500 Cr sales from this segment. Rest of competition is focusing on women’s segment too but they are sticking to bottom wear, leggings and camisoles where the number of SKU’s are relatively way lower. Women’s segment has been a huge challenge since that segment is capital efficiency dilutive at the economy and medium segments. At the premium and super premium range a high enough selling price can buffer for the higher working capital needs, hence business makes sense for a premium brand like a Victoria’s secrets. Very fascinating to see if Page can crack the economy and mid range market (which is 2X the size of mens market) without impacting their working capital ratios and balance sheet. Bata is trying to do something similar in the footwear segment and it will offer an interesting parallel. If they get it right both of them may have a free run for the next 8-10 years which might explain why the valuation for both is well beyond normal bounds.
This is why I find equity research fascinating - the moment one is able to link tangible business and trade channel aspects to financial analysis is where one can see the true moat/strength of a business! Else it just becomes an exercise in excel modelling and debate on valuation basis P/E and EV/EBITDA.