Page industries

[Hrishi]

Management said clearly that If there was no lock down, there numbers would have been better than previous year. They would have had double digit revenue growth and a profit comparable to FY19.

Management was not having one time cost of IT and business transformation costs for Q4 but not evasive as per me.
They said Q1 is better than there expectations and production is back to 85%. Leisurewear sales are up at the cost of formal ware (as people are working from home). In 8-9 months they will be back to 2019 level. Digital is also doing very well.

I did not take any notes and could not draw any conclusion on volume growth possible but I did not felt disappointed. I am invested in Page for last 5-6 years and see this as long term bet for my portfolio. I can change my view any day if i get better opportunity or feel uncomfortable with any new data point.

[Vinay_T_M]

Concall notes:

• Mangement said that they’re taking cost control mechanism

Aditya Soman - Goldman Sachs
Q) Has online as total revenue increased? If yes, how much? trends for the reopen?

• current situation is better than expected
  huge swing on innerwears (loungwear business), 7% swing there. we have good enough stocks to catre to the market, production is ready, 85% people are on board
• huge swing towards e-commerce, it is now in double digits in percentage of sales. Encouraging in offline as well
• Jockey Junior was started last year, contribution is still small, 58% yoy growth, covid affected the trajectory
• Regional players/smaller brands logistics & supply chains have been hit. Considering our strong balance sheet & cash position, this would be advantageous to us
• 250+ new stores opened in the last quarter, Juniors as a percentage of sales is under 3%

Jeetu Panjabi
Q) Do you see any parts of the business to be hit 6-9 months from now?

• EBOs got overwhelming response upon reoponing. Out of 780 stores, 680 are opened, average daily sale is back to pre-covid era
• salaries are paid in full even in April/May
• employees are happy to come back to work
• our estimate for sales was below the current demand

Bharat Shah - ASK
Q) loss of sales? how was the impact that to bottom line

• had investments in IT, Jockey Junior
• bottom-line would’ve been same as last year without COVID
• couldn’t dispatch 90 odd crores which should spill over in Q1, we also couldn’t deliver some orders which are not billed, otherwise, PAT would’ve been positive (growth). FY PAT would’ve been 400 crores

Karthik - Fidelity
Q) how has the competitive intensity changed?
Q) how has the inventory levels changed with mom and pop distribution stores?

• current demand is above expectation
• competition still remains the same, no change, we have advantage in supply chain

Bharghav - Kotak
Q) what would be cost rationalisation measure to reduce our fixed cost in fy21, there was spends in IT & Jockey Juniors, any other things?

• we have looked at IT (delayed by a quarter or two)
• opex for fy21 is aimed below Fy19 levels
  Q) Average realisation better in fy21 since it’s been hit this year? will it flow at margin level
• we’ve witnessed serious increase in cost realisation, we’ll be back to average 20-21% EBITDA

Vinod - Franklin
Q) breakdown of the Jan sales?

• will answer later (DIDN’T)
  Q) gross profit margins declined from 63% to 58%, reason?
• due to lower sales, gross margin has been hit since our investments in fixed assets were already done, for FY, it’s still okay. gross stays at 39% including other expenses
• production was 122% of sales in Q3, in q4 it’s 113%

manas shah - icici pru
Q) Do we see any labour shortage issues?
salary cuts in the past?

• no salary cuts for anybody in the co
• we look after the labour even during the tuff times, 85% are back
  Q) receivable days have come off shortly but inventory has also not moved, reason?
  normal cycle is 10-11 days, wc days for fy20 is 57 days, it hasn’t moved big, because we didn’t sell in the last week of March, collections have come in, inventory has stayed put

Milind
Q) consumer buying pattern right now? any downtrend?

• responses has been good, average per piece has gone up significantly
  Q) any problems on supply chain/man power ability on the vendor side?
• minor disruptions were there for smaller vendors, it’s now coming back to normal

IIFL
Will we protect EBITDA margins in the coming future or target higher sales growth?

• we’ll do whatever we can to move it back to 20-21%
  Q) volume growth rate for year and q4?
• volume declined 3%, 18.7% for the quarter

Utkarsh Maheshwar - Reliance general insurance
Q) is it because of low sales the margins declined?

• Yes, it would’ve been back to 20-21%
  Q) improvement on realisation? can this transform into upgrading in future also (for long term), any trend?
• wfh has resulted has resulted in huge demand for loungwear, boxer shorts segments, big orders are coming from MBOs, demand is robust

Manish - Nippon India

• overall opex will be below/around fy20/fy19, things will depend on sales trend

Sangameshwar - Kanchelium investments
Q) will weakening of balance sheets of competitors, will it strengthen us as more vendors switch to Page?

• we’re always net debt free, ROCE is always above 60%
• strong points, suggestion is yes
  Q) will the volume decline coming back in the premium innewear segment, will change in product mix result in overall realisation?
• on the contrary, the premium segment was growing at higher growth rates
• difficult to comment on realisation with change in product mix
• athlesure is still doing good, it’s growing very fast, sports wear is gaining market share

Bharti shah -
Q) what are the historical gross margins?

• always consistent around 38-39%
  Q) fixed costs have gone up by 170 crore but sales have grown up by only 3%, why?
• this year, we didn’t get the actual revenues but we’ve invested in juniors, IT. These are long term investments, we expect them to bear fruit in medium to longer term
• IT will be a one-time investment, some of our business partnership with Delloite is also one time

Q) distributor incentives should decrease, is it a good way of looking at it since the revenue targets have been missed?

• operational question, won’t answer. provision has been made for this in fy20 itself

ICICI securities
Q) thoughts on prioritisation on R&D, investments?

• IT infra is halted for sometime
• ARS doesn’t require huge investments, it needs us to provide a good product mix and henceforth the distributors/partners to order
  Q) 3-5% price hike for this year?
• not taken a call on that yet
• ad spends down from 120 crores to 114 crores

Note - These are notes taken by me while on the call (please excuse me for the grammatical mistakes)

[Vinay_T_M]

No, they didn’t announce any dividends for this quarter.

• Total dividends for FY20 - ₹202 per share (₹270 crores including tax on dividends)
• Last FY, it was ₹338 per share (₹454 crores including tax on dividends)

[Anirudh1]

We have been hearing that Page Industries is taking steps to capture the Kid’s wear market (current Page’s market share being 2% in Kid’s wear). The focus of management has shifted to this segment.

Kid’s wear contributes 5-10% to the company revenues. But im not getting why the company is instead not focussing more on Athleisure wear (contributing 25-30% to revenues).

Athleisure wear is the fastest growing segment in Page’s portfolio with around 25% CAGR in the past 10 years. Moreover, it would be easier for the company to tap into this segment where their brand is already established.

Kid’s wear still being highly fragmented with low pricing power (as focus remains on low price by customers) and lower growth (12-15% CAGR expected), i dont get why the management doesnt talk much about Athleisure wear.

Any thoughts? Please correct me if im wrong with the data here.

Note: Even Athleisure wear is not penetrated and has significant room for growth. Page’s market share here is said to be 6-8%.

[vidurchhabra]

It makes perfect sense, many sucessfull companies globally with a long term vision follow the same principle.
By making kids your customer at an early age they start empathising and identifying with a brand and thus you have a customer for life.

[Investor_No_1]

Hi, I have a very basic question here. How does the Jockey licensing agreement with page works. is the licence directly with the listed company or with any of its wholly owned subsidiary? Also, what is the tenure and terms and conditions for this licence and what stops Jockey from giving more licence for India like say how a Mc Donald does. Lastly, why did Jockey chose Page out of all the companies for their partner? Thanks

[aerofire]

License agreement is with listed Page Industries . Its the 60+ years association with Genomal family and india segment being the best performing across the other global licensee’s which will ensure page will be the sole licensee in India and it extends to - Sri Lanka, Maldives, Bangladesh, Nepal and UAE .
License was extended till 2040 recently .
Sunder Genomals interview on the same -

Page Industries Hits Record High After Jockey Extends Licence

[Anirudh1]

My take on Page Industries. Detailed competitor analysis with other brands in the segment using numbers only revealed some interesting results!

Originally posted on thealphainvestor.com

Would love to hear your feedback and comments on this one!

[vikasbargale]

Just 2 updates as a customer of Jockey. ( Maybe “biased” as I am also an investor)
Actually page has come up with good quality FACE MASKS costing around Rs. 125. Available in 3 sizes and has 7 layers.
Attaching the images below

Check their website for more details.
I personally liked them. Not only good quality but comfortable with nose clip.
Of course, not certified as N-95 , but they are far better than the cheap N-95 masks.
But unfortunately I have not seen much of their advertisements on social media.

Other thing is their impressive delivery from the online store. I stay in tier III city where it takes more than usual time for regular deliveries through online store.
Means after I ordered, there was pune lockdown and then kolhapur lockdown. But in the small window if 2 days in between I got the delivery within 5 days through Blue-Dart. While I am still waiting for my Amazon orders since nearly 20 days now.

That shows they are very serious about their online business also.

Just felt like sharing.

Regards,
Vikas

[rkirana]

I bought these masks as well, infact all 3 colors totalling 6 masks. Cost per pair was INR 269 Rs and INR 229 for the kids masks. This shows the company is very innovative one.

The company business performance has been improving and the P/E has been falling. Not able to understand the same except that the growth expectations were probably higher from Page

[Vinay_T_M]

Page will be announcing its Q1 results today but there has been a report of human rights violations against Page due to which Norway’s Sovereign wealth fund has exited the co from its holdings. Speedo is apparently investigating this report. Read more:

Speedo to Probe Findings of Human Rights Violations Against Indian Partner Page

Concall scheduled at 4PM, will be interesting to see if anyone from the management speaks about this topic beforehand

[Vinay_T_M]

Page Industries Q1 results are out. Revenues are down 66% and as expected, the co has posted a loss (₹40 crores) for the quarter
https://www.bseindia.com/xml-data/corpfiling/AttachLive/28d10397-9a16-4021-a2eb-e85d951ebd64.pdf

Here’s a snapshot for the same:

Found this in the notes - " Basis such evaluation, the management does not expect any adverse impact on its future cash flows and shall be able to continue as a going concern and meet its obligations as and when they fall due.

PS - I couldn’t find any mention of the balance sheet position of the company as on June 30th

[Ediacaran97]

Any dividend declared for the quarter?

[Vinay_T_M]

Nope. Co has said that they have cash equivalents worth ₹173 crores (increased by 56%)

[Vinay_T_M]

Concall transcript

Update from the management

• Volume down 69%, revenue down 66%
• Operations resumed from last week of may
  Increasing trend of sales with greater demand especially in e-commerce side
• Capex on hold (will start from Jan 2021), will double the capacity from 260 million pieces in the next 4-5 years
• Product differentiation (innerwears, loungewear, socks) and focus is same
• Introduced face masks (positive remarks)
• Kidswear is special focus area (good feedback and customer acceptance)
• Our gross profit margin is down from 39% to 23% due to delayed absorption, salaries were paid in full during Q1
• Provision of ₹10.7crore due to slow inventory movement. This amount should comeback going ahead as the inventory movies
• Operating expenses and advertisements were reduced
• Cash & cash equivalents has increased to ₹173 crores by 56% due to better working capital management. No additional loans were taken, have strong balance sheet
• Net working capital has reduced to ₹410 crores (I think it’s year-wise) due to better sundry debtors

Birla Sun Life - Trilok Agarwal
Q) How’s the business progression panning out? Numbers look weak

• Working days were only 33 in this quarter, change in lockdown/rules hasn’t helped either, subsequent months have shown amazing traction and we’re back to last year’s numbers from August
• segment wise numbers can’t be divulged. Athleisure business is on the growth trajectory
  Q) How’s gross margin impacted because of labour costs, couldn’t understand that?
• gross margin is after material, factory wages & factory overhead, lower absorption lead to lower GM

IIFL - Avi Mehta
Q) Recovery, how are the numbers for August? Demand trend?

• August 2020 sales is close to August 2019
  Q) Athleisure/outwear vs innerwear margins?
• not divulging the absolute margins, same margins as with innerwears
  Q) Comments on speedo allegations?
• without having complete details verified, they’ve published this. We’re denying this outrageous claim/report. We have been following all the laws of the land for the last 25-years

Kotak MF - Bhargav Buddhadev
Q) Price hikes have been taken? What’s the rationale behind it?

• Won’t call it a price hike, we’ve only touched a few products and we do it every year (marginal increase to maintain the EBITDA levels). All of our products are still value for money even after this price increase
  Q) Rupa, Lux, Dollar have reported contrasting numbers, their revenue degrew in single digits, any comments on that?
• It’s surprising, won’t comment on other company operation. 60% come from six main metros and A cities. 10-12% decline in contribution from those cities. Our dependency on metros and A-class cities is higher
• Other city contributions (in revenue share) grew by 10%, we don’t eat into each other’s market share
• our ASPs grew by 12%
  Q) What’s the operating cashflow for this quarter & yoy bases?
• OCF has been held behind, hence we show cash and cash equivalents. Working capital is down ₹40 crore this quarter. We’re doing well on the collections part and paying our vendors on time (been supportive), have gone an extra mile to support them

Ambit - Ritesh Guta
Q) Labour availability is still normalising now, is there any supply issue?

• Luckily at the start of the year, we had a healthy inventory which helped. We’re still not working on 100%, factories are operating at 85-90%, starting this month we’re closely working on it (which is improving every passing month)
  Q) No mix impact but how are the gross margin decrease so huge?
• it’s due to lower absorption and factory fixed overhead, and not due to the mix
  Q) Traded goods share have increased, why is that?
• outsourcing (FOB) is around 36% which has lead to sustained increase in traded goods

Goldmann Sacchs - Adithya Soman
Q) Channel inventory, has it increased?

• On the contrary, it has gone down, secondary sales is at around 18% in the first quarter
• EBOs have been the backbone during this time, we started WhatsApp service too, 95% of retail outlets are open
  Q) ASPs grew 12%, was it Athleisure or innerwear?
• Largely because of Athleisure

Axis Capital - Gaurav Jigani
Q) Sharp decrease in the operational expenses, how sustainable is it?

• This is sustainable throughout the year, we have a budget plan for every department. We’ll be spending more on the marketting front
• Advertisements were deferred in Q1, royalties too were delayed due to lower sales. We’ve implemented zero-based budget control system, it’s a focused approach but we haven’t saved on the employee cost. We’ve paid everyone who has come back to work (~90%). Other operating costs were postponed
  Q) Gross margin, labour costs, wouldn’t it include factory wages also?
• cost of raw material for in-house manufacturing, bought out outsourced direct purchases. In house production doesn’t include labour and factory overhead. We monitor Raw material cost, factory overhead, outsourced purchase + labour. That’s the consistent GM formula we use
• not a number which should be read straightaway without looking at the conversion cost

Edelweiss - Nilesh Saha
Q) Gross margins, how are they reported, want to know the standard reporting in it? Please explain it for our understanding

• we can take it offline, I’ve mentioned enough about this
  Q) Secondary sales have been higher, what metrics do you use to check the gap between these two? How are you making sure your annual partners are coming back to you to replenish that stocking? What toolkits are you using?
• All of distributors have a software provided by us, we also have an automated tool where the secondary sales are booked on, then it’ll sit on the billing tool. On any given day, we can check the live data from distributor to the retailer. 60% distributors are under automated replenishment system (ARS), every Tuesday and Friday we dispatch the orders to the distributors.

Spark capital - Tejas Shah
Q) July-August recovery trend?

• In June, 80% workforce was back, problem with vendors who had problem with their manpower which are more or less settled by now
  Q) Provision on inventory, what’s this about, can it be a write down?
• It’s a standard policy

Motilal Oswal - Krishan S
Q) Contract manufacturing, 30% of sales, was there any difficulty on that side?

• Yes, there were issues till May and two Weeks of June. From the month of July, they’re in a better position than us since some are in smaller parts of Karnataka & Tamilnadu
  Q) Recovery in August?
• EBOs is more or less equivalent to last year’s numbers. E-commerce is up from 3% to double digits. I believe it’ll sustain going further as well
  Q) Confident on positive growth from August and Q3 onwards?
• We’re HOPING for that
• LFS (mall foitfall) underperformed has underperformed by quite a lot. Opening was a challenge for lot of them and footfall has also been considerably lower

Franklin Templeton - Vinod Bhansal
Q) Is secondary sales 18-20% higher than the reported ₹285 crores?

• Yes
  Q) Inventory, why is it not going up to older levels?
• Every retailer, distributor is prudent to invest fresh capital, people are cautious. Mentally, we’re still not there to the new normal. Festive season, I hope people spend more
  Q) Inventory provision of ₹10.7 crore?
• We look at the aging, the elastic, fabric, packing material etc, it’s a standard policy for provisioning. It’s not necessary that the goods are bad. Items will come back to queue. We follow good and consistent practices. If the business was normal, this Inventory would’ve been moved out
  Q) Please explain the gross margin computation part since most of us have the same question
• it’s a mix of conversion cost, labour not added for in-house production, cost of goods, factory overhead. Removing provision, it’ll be 48%
• ₹54 crore factor wages this quarter vs 63 crores for last year, sub contact expenses, power and fuel are also added
  Q) Please put the Excel sheet calculation of this gross margin in your website or somewhere else
• yes, we’ll do that

Goldman Sachs - Adithya Gupta
Q) How’s the change in inventory carry/refill from the distribution side due to ARS?

• ARS is very important for Athleisure/outwear business, it’s 100 ARS on outerwear distributers. On innerwears side, ARS implementation should be between 60. inventory situation at the dealers side is improving
• Each SKU has 30-day inventory on the dealer front. ARS is done to bridge the anamoly since some SKUs were at 30-days and some were at 40-days. We want distributors to maintain healthy stocks
  Q) Capex put on hold till Jan 21?
• We generally plan 18-24 months prior in order to create new capacity but we have decided we’ll start reviewing this in Jan-Feb 2021

Bharat Shah - ASK
Q) Even before covid, we’re facing some challenges for the last two years.GST - distribution streamlining issue etc… Due to the slowdown of economy, normal peformance of Page has not been fully discovered. But we’ve improved our internal responses approaches by improving marketting resources, branding, streamlined process on each product, technological & business improvements which are all good for long term to improve the calibre of the business. We’re unable to understand the Competitive situation of Page. Comments on the same?

• You’re absolutely right, last couple of years haven’t been good. Covid hasn’t helped the cause. This will only make us stronger, be it ARS, product mix, supply chain. Implementation of GADA (tool to produce right products in the right timeframe), IT investments, senior managers Investments, we have done all the right things. We hope this is a restart for us
  Q) Once the COVID is behind, will Page get back to the growth rate we used to see before & will we see improvement in the quality of the growth rate?
• No reason to believe why that shouldn’t happen. Inward looking, cost optimization have been great in this year. We’re ready for the big leap
  Q) Typical Operating margins 20-22%, will we come back to that?
• Not just hope, we believe in this absolutely. We know the market size and we’ve done a lot in the last 24 months
  Q) How’s the competitive scenario?
• Competition was always there, lot of brands and business houses came into this, we beleive the market is huge and we’ll only improve. We welcome competition. It hasn’t drastically changed, addition of one brand in last 2 years won’t see any drastical change. We want to become stronger and better

Record attendance of 480+ people

[bhaskarbora67]

Page industries

Key takeaways from the conference call

Healthy recovery witnessed

• Post the complete shutdown in April, business resumed only in the
last week of May, resulting in only 33 working days available in 1Q.
This led to 66% sales decline, with underlying volumes down 69%.

• The athleisure segment has seen a significant increase in demand and is on a growth path. E-commerce made a double-digit
contribution to sales in 1Q (3.5% last year)

• The LFS channel underperformed in 1Q, whereas EBOs have done relatively well

• Management stated that sales declined more than peers, given the strong reliance on sales from metros and A-class cities (60% from
six main metros, including Ahmedabad and Pune + mini metros).

• The sales recovery was healthy, with August registering flattish sales
YoY.

• By June, 80% of the workforce had returned to factories (~90%
now). Contract manufacturing partners are better placed than the
company itself, given that most are operating in smaller towns

• Capacity utilisation stands at 85-90% and all factories are open.
However, intermittent issues arising from government regulations
persist. The situation on the supply side is improving

• Management remains hopeful of a strong recovery around the
festive season.
Hopes to achieve 21% Ebitda margin going forward

• Page has increased prices across three products.

• Ad expenses were deferred during the quarter. This along with cost
control measures resulted in lower operating expenses. Some of
these savings are expected to sustain going forward. Marketing
spends will increase going forward.

• The company hopes to achieve 21% Ebitda margins in normal times.

• The innerwear and outerwear segments have a similar gross margin.

• A provision of Rs107m was made for slow-moving inventory in 1Q.

Balance sheet remains healthy

• Cash & cash equivalents
increased 56% QoQ to Rs1.7bn due to
better working capital management. Working capital reduced to
Rs4.1bn in 1Q. The company did not borrow any funds during the
quarter.

• Inventory levels had stabilised and were down QoQ at the end of
1Q.

Others

• Management has clarified that they strictly adhere to all labour laws

• Outsourced production share stands at around 30%, while 70%
goods are produced in-house

• Company has 100% of outerwear distribution under ARS, while
innerwear is closer to 60%

• The new face-mask launch was met with good indicators

• Muted capex is expected this year. Most of it will begin post 2020

[bhawinn]

Norges Bank, the central bank of Norway, has decided to exclude India-based Page Industries Ltd from investment by the Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund. This decision is an outcome of a recommendation by the Council on Ethics of GPFG to exclude from investment Page Industries due to an ‘unacceptable risk that the company is responsible for systematic human rights abuses’.

The Council, in its report, had stated, “Investigations into working conditions at one of the company’s factories identified numerous labor rights violations, including verbal and physical harassment of employees and occupational health and safety hazards. The company also seems to restrict employees’ rights to organize.”

The Council emphasized that Page Industries has not provided any information to help clarify the case or how it works to prevent norm violations at its facilities. In practice, it seems as though the company does little to prevent the abuse of labor rights in its operations.

Post the recommendations, Norges Bank decided to exclude from investment Page Industries.

Below is the Link:

Page Industries Ltd - Council on Ethics

“The Council attaches importance to the employees’ reports of humiliating verbal and physical punishments when employees return from lawful holiday or sick leave, fail to meet their production targets or make production errors, and the fact that this seems to be a well-entrenched practice among managers at the factory. This must also be seen in in light of the fact that the workers themselves seem to be obliged to bear responsibility for reaching the production targets even when production is halted for reasons that are neither their fault nor within their power to control.”

“An aggravating factor is that the harassment is directed at subordinate employees, who are unable to defend themselves without being punished for it and must, therefore, be classed as vulnerable. The Council also attaches importance to what seem to be violations of national regulations relating to fire safety, personal protective equipment, electrical hazards and equipment maintenance, and indoor air quality that may pose a hazard to health. In the Council’s opinion, the company’s practices constitute a violation of the right to safe and healthy working conditions, including the right to freedom from harassment,” the report says.

According to the Council, Page Industries has failed to help clarify the case or give it the permission to inspect the factory. It says, “…the company explained this refusal by saying it could not permit an inspection due to its agreement with the licence issuer. This proved not to be correct. Page Industries has further failed to comment on the draft recommendation to exclude it from investment by the GPFG. In consequence, the Council has had access to less information in this case than in other similar cases it has assessed. The information deficit applies to both the scale of the norm violations and what the company is doing to prevent norm violations.”

[Kish44]

Here they talk about allegations:

Page Bets On-Demand Revival | Chandrasekar K of Page Industries To ET NOW

[Vinay_T_M]

Hi everyone, does anybody have an idea on what’s the same store growth of Jockey’s EBOs for the past 3-4 years?.

I’ve written a query on the same to their investor relations section care@jockeyindia.com a week back but there’s no reply from them

[Vinay_T_M]

Page Industries Q2FY21 results are out. Here is a snapshot of the same:

Revenue is down 5% YOY but PBT is up 10% due to savings in raw materials and purchase of traded goods

Balance sheet remains robust; cash and cash equivalents have gone up from 116 crore to 408 crore

As @Anirudh1 had pointed out earlier in one of his earlier posts, Page has had a wonderful relationship with the suppliers. It looks like they’re trying to squeeze in a lot more compared to earlier days as seen with a massive increase in trade payables

Strong cashflows; however co is holding an inventory of ~146 crores

An interim dividend of INR 100 per share has been declared