Page industries

[Vinay_T_M]

Concall excerpts Q2FY21

Sunder Genomal, MD:

• We have had a heartwarming experience since the economy has opened up

• We have continued to add distributors and opened new EBOs despite a tough environment

• October was the turnaround month, November is double-digit. We expect to continue with the double-digit growth in Q3

• Revenue target of $1bn in 5-years remain intact

• Investments into Salesforce, ARS, separate MIS for analytics, re-engineering

Vedji Ticku, CEO:

• 160% revenue growth from the previous quarter, volumes down 13% YOY

• 95% MBOs are fully functional, all the EBOs are opened

• 60 new EBOs have been opened in the last quarter. Total number of EBOs should be 810+

• Greater demand in e-commerce and Athleisure

• Digital marketing is the new area of focus for us

• We are Present in 2870 cities+ now

Chandrasekhar, CFO:

• PAT margin of 15% (best in 3-years), implemented through tight opex control

• Gross margins are back to 40%, the EBITDA margin is at 22%

• The net working capital is 536 million

Q&A:

Bhargav Buddhadev - Kotak

Q) Is it possible to share the trend in secondary sales?

• It’s one of the best in recent the quarters

Q) Any supply constraints?

• Yes, in the earlier quarters

• Whatever revenues we have lost cannot be recovered

Q) Yarn prices up 12% in a month, any price hike?

• this is the prices of the old crop, new crop comes in December/Jan and the prices will be back to normal

• We touch 8000 stores in Juniors, 15 EBOs for Juniors

Aaditya Soman - Goldman

Q) Guidance for Q4 is 100% but why not for Q3. Supply constraints leading to revenue loss, how much was it?

• Management didn’t specify how much revenue was lost but touched on the trend and didn’t comment on the specific question

Q) Is it because of the pent-up demand we are seeing growth?

• Sales are on a rising trajectory from August, it’s not a pent-up demand

Q) 13.5% volume decline but 4% revenue decline, what was the mix like?

• Athleisure is in good shape, didn’t specify the split, double-digit MOM growth seen for Athleisure

Nihal Jham - Edelweiss

Q) Comment on the cost-saving initiatives?

• We spent less on ads and marketing, the overall reduction of 45 crores

Q) The expansion was 60EBOs but how many MBOs and what’s the plan for MBO expansion?

• We push the count at an average of 10% every year

Arnab Mitra - Credit Suisse

Q) E-commerce - what’s the current traction like; and will it continue post lockdown?

• E-commerce has been the silver lining this year, there was a struggle in the previous quarter from our end in terms of supply, we worked on improving our infra which took 30-45 days, average demand is ~2x compared to earlier years

Q) Margins are at 22%, will the opex come back to previous levels once the ad spends and other operating costs?

• There’ll be an increase in ad spends and digital transformation but margins will sustain

Avi Mehta - Macquarie

Q) Is urban which contributes to 60% revenue in the top cities still under pressure?

• Most of the metros are back expect Mumbai. This is no longer a headwind

Q) Provision of slow-moving inventory in Q1, is it written out now?

• it still continues , as we move into Q3 and Q4 they’ll be sold

Q) Any price increase taken? Other income down?

• subsides are low this year and hence lower other income

• There wasn’t a significant price increase, we thought that there were a few products were priced way below the minimum price and hence we adjusted the prices

Sameer Gupta

Q) Double-digit growth in September? Is it also because of people spending more people at home, will this revert when we revert back to normal?

• We cannot have only Athleisure growing for the overall co to grow at double-digits, Innerwear has also grown well. We don’t think the demand will be subdued post people going back to work.

Q) People will see the quality of the product and the value for money

Gross margins are up, is it because of writing down the 110 crore inventory in the last quarter?

• no, that’s due to the improvement in this quarter

• 3% improvement in raw materials, we didn’t buy in Q1, 1.5% increase in Q2

Mihir - Edelweiss

Q) Will we see double-digit growth in Q3?

• Trajectory from August is good and improving every month, we hope it’ll be much better. Didn’t specify if they would see double-digit growth in Q3

Bharat Shah - ASK

Q) Not a question for this quarter, it’s a broader question. We’re invested in Page for the past 10-years and growth has been smooth & easy except for the last few quarters. There has been a significant improvement in technology initiatives, design capabilities, product placement etc… Have we crossed the hump and can we see the Page of the old in terms of growth? Discipline is good, no easy credit is given. I’m really delighted. Discipline in cash flow and working capital improvements. Will the difficult phases be behind in 5-years?

• You’ve been a shareholder for a long time and we thank you for that . Yes, we believe we’ll be back in terms of growth. We’ve come a long way, new interventions put together, achieving a revenue of $1bn in 4-5 years is our target. We’re ready to take the big leap (the exact same statement was heard in the last quarter and it was Bharat Shah who had asked the question)

Q) I’m not concerned about the pandemic, does the long term growth remains intact?

Yes, we strongly believe so

Akhil Parikh - Illara capital

(Call got disconnected, missed the next 5 minutes)

Sunder Genomal was trying to clear the air on the human rights violation issue: We never stop to invest into ourselves to outperform. 1bn revenue isn’t a big ask compared to the market potential we’re in. Our essence remains the same, strategies will be improvised. The fundamentals are very strong in the backend. We have 15 manufacturing and warehousing locations with 17000 workers, Norway allegations were made in 2018 by a handful for disgruntled employees in the Bengaluru plant (1000+ people). We explained point by point to the council. As per their policy, for reassessment, they’ll do it at the earliest possible time (middle of next year). All those allegations are false, the truth will prevail.

Raj Motiwala

Q) Can you specify the break-up of the revenue across segments?

• We used to give this earlier, we’ve stopped in the last 10 quarters.

Q) Have you found a formula to open the women innerwear market after seeing sales data through eCommerce players?

• Our penetration levels are low in women’s innerwear (5%) compared to men’s (20%) and it’s a bigger market then the men’s innerwear market. We have major plans for the women’s segment in the near future

Q) New product launches look impressive, is the larger focus on Athleisure?

• Athleisure is the second largest in terms of overall revenue. The market is growing fast with the into of gym wear etc

Ankit Kedia - Philip Capital

Q) Digital transformation, how will it help at the backend? Deadline for JBA (for billing) is by December, DHL on logistics……

• We want a seamless supply chain. We want to know what we need to sell and it should be available at the right time.

• JBA will collate info on the demand pool and feed it to SAP. DMS - distribution management software, we have a clear vision on understanding what the stock is at the distribution end. ARS helps in creating automatic ordesr from the distributor when the inventory is lowering up, FSA is for tertiary demand. We want zero sales loss, the customer gets the best service through MBO, EBO

Q) What will be the capex for the $1bn revenue plan, will the Ananthpur facility be ready in Q4?

• Orissa plan will be first, it’s a large facility. Ananthpur is next in the line

• This year, we haven’t planned any capex, 73 crores (this year so far). FY22 Capex not planned yet. The expectation of all capex put together will be 200 crores (in 4-5 years?)

• Orissa plant: We don’t want to put all eggs in one basket. This is done for a risk management point of view since most of our plants are in Karnataka

Q) Total retail reach in women’s (store wise)

• 45% out of the total number of stores

[zygo23554]

The future growth depends on how well the company is able to scale up the women’s segment in the urban centers without diluting their historical inventory turnover. The number of SKU’s in the women’s segment is way higher than the men’s segment, for this reason inventory turnover cannot be as high what the business has historically done. Intuitively, e-commerce channel might be a better way to scale than to have dedicated stores for women, for reasons both cultural and economic.

If they manage to get the mix right for the women’s segment, the business can grow at 15% over the medium term. If not I don’t see how it can, which is what the market is being circumspect about right now.

I am keenly tracking Page Industries and Bata India on this aspect, they are attempting to be the first pan India brand that can scale in the women’s segment in their respective markets. Interesting times for consumer brands in India.

Disclosure: Not invested

[Vinay_T_M]

After 10 quarters of continuous underperformance, Page Industries has announced results which looks like the Page of the old

Revenue up 17% and PBT up 77%

Co has also announced a second interim dividend of 150/- per share. Total dividends for this year will be 250/- per share. (100/- per share was announced in November 2020 during Q2 results)

This would mean that the co is paying out ~275 crores in dividends this year with one quarter to go. Looks like the co is not betting on large reinvestments this year (& possibly FY22 as well) since the payout would be 70% taking 400 crores as the average PAT

[Vinay_T_M]

cont…

Significant margin improvements due to cost controls. EBITDA margins have jumped from 17% last quarter to 24%. Cash and cash equivalents now stand at ~495 crores (cash is now 30% of the total assets). Page says that they’ve reduced the operating costs by 31% (9-months) to 305 crores. No idea if they can sustain this sort of efficiency in future

Highlight from Sundar Genomalji’s comments on the recent results:

We are encouraged by the strong demand in all our product categories in all channels. The Athleisure and Kids categories have particularly shown very promising growth and acceptance.

[Vinay_T_M]

Page Industries Q3FY21 concall highlights:

• Kids-wear continues to be a special focus, 28 EBOs for juniors, 192 specific partners across 174 cities with a sales team of 150 people
• Company sees great potential in rural (tier 3 and tier 4 cities), expanding the distribution in these areas in a phased manner
• Despite increased prices in yarn (key raw material), the company will not be taking any price hikes this FY since the price hike taken in August is sufficient to offset the price increase
• Strategy for rural: have shortlisted 30 odd products in a bouquet approach; will be budget-friendly
• Surge in thermal wear sales for the last 3-months (seasonal?)
• Athleisure growth 9M - Very high double-digit growth.
• Athleisure is almost coming into our men’s business in terms of the overall pie
• Capex guidance for FY22 - 300 crores
• With the offices being opening up, can we sustain the mix in Athleisure - yes, been telling this since 3-4 quarters
• Added 7000 outlets on the retail side, 80 new EBOs have been opened
• Upselling of Athleisure has helped us well overall (ASP is 2-3 times that of innerwear)
• Margin guidance - 22% is our norm, will stick to it
• This is not pent-up demand. The kind of headroom in the market with low penetration levels, we see this 16-17% revenue growth as genuine regular demand.
• Penetration levels - 20% in men’s, 6-7% in women’s, 8% in juniors
• Socks business has come back nicely (was down till Q2 FY21)
• Labour cost for this quarter YoY is 7.8% vs 8.5%, manufacturing overheads is 3.6% vs 4.5% respectively

Full transcript (pdf) - Page_Industries_concall_Transcript_-_Q3_FY21.pdf (86.1 KB)

Note - Please ignore the grammatical errors in the transcript. Attaching it as a pdf this time since scrolling all of it would make the VP thread elongated

[bhaskarbora67]

Page industries

Highlights from the management interaction

 A 4-5% price increase was taken in 4QFY21, which is slightly higher than
usual, to combat the steep increase in yarn prices.

 It expects revenue in 1QFY21 to be affected by the ongoing lockdowns as
most stores remain closed.

 The management has maintained its 21-22% EBITDA margin guidance.

 The company had 930 EBOs at the end of FY21, with ~180 new additions,
including 38 exclusive outlets for Jockey Junior.

 Inventory of finished goods was much lower than usual due to stronger-
than-expected demand in 4QFY21. Hence, end of period inventory days of
71 in FY21 may not be sustainable.

[zygo23554]

@Vinay_T_M

Page Industries Q3FY21 concall highlights:
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.
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• Company sees great potential in rural (tier 3 and tier 4 cities), expanding the distribution in these areas in a phased manner
  .
  .
• Strategy for rural: have shortlisted 30 odd products in a bouquet approach; will be budget-friendly
  .
  .

This right here is an indirect acknowledgement by the management that they are unlikely to grow 20% p.a. if they stick to their past template. Else why would a business that was happy focusing on the premium segment look to get into semi urban India at a lower price point?

Kind of drills home the importance of doing independent thinking and not getting carried away by how the market values a business. Over the next 4-5 years we will see many highly valued consumer companies getting new competitors from D2C brands that are able to connect with target segment better. All of these D2C brands will target the younger premium segment audience in the menswear category, the clutter will only increase from here.

Growing revenue at 12%+ p.a. from menswear alone is not as easy as was till 2015. Category expansion is what can get growth rates back to the 20% p.a. range, the management here is on the right track.

Disclosure: Tracking, not invested. I am a SEBI registered IA

[Vinay_T_M]

Page Industries recent shareholding pattern suggests that there has been a 0.41% reduction in the promoter’s stake; down from 48.32% to 47.91%. This should be around 45000 shares (~140 crores) which were sold between March and June.

I managed to crawl their annual report to verify if this was done by the outgoing CEO, Vedji Ticku. He held only 200 shares of Page and the company does not have any policy of stock options for their directors/employees. So, this stake sell has to be done by one or all of the Genomal brothers as each of them hold 16.1% stake in the company as confirmed from the block deals section reported on stockedge. The promoters had last reduced their stake from 49.01% to 48.32% back in June-Sep 2018 as each one of the three brothers cut their stake by 0.22%.

There is also a notable change in the FIIs stake which is down from 25.89% to 23.62%. Nalanda’s stake is the same while “Arisaig Asia Consumer Fund Limited” who held 1.4% looks to have either sold out completely or the shareholding has fallen below 1%. Another one is “St. James’s Place Emerging Markets Equity Unit Trust” which held 2% in the last quarter has cut its stake to 1.4%.

• From a lifetime high of ~37.8% in December 2018, the current FIIs stake is at 23.6%; a significant decrease of ~14% from the peak.

Mutual funds have increased their stake from 12.07% to 13.25% and the insurance cos hold 4.15% (was 2.9% in the earlier quarter).

• The combined holdings of the DIIs (MFs+insurance cos) has gone up from 3% in Dec 2018 to 17.4%. The retail holding is more or less the same

[madhug]

Promoter selling has been going on for 10 -11 years when the stock price was around 600 levels. Many investors missed this because of this reason. In hindsight, this appears to be a non-issue.

[Surender]

FY21 AR observations (noted as is):

EXCLUSIVE BRAND OUTLETS:

• 930+ (Was 750+ in FY-20) Exclusive Brand Outlets
• 46 (38) Exclusive Woman Outlets
• 38 (No info in FY20 AR) Exclusive Juniors Outlets
• 190+ (180+) Outlets in malls
• 740+ (570+) Outlets in high street
• Present in 330+ (270+) cities

CHANNEL SALES:

• 3,900+ (3550+) Distributor Accounts
• 2,890+ (2850+) Cities / Towns
• 78,000+ (66000+) Retail Network
• 620+ (530+) Channel Sales Strength

LARGE FORMAT STORES:

• 22 (23) Large Format partners
• 2,350 (~2000) Stores
• 3,600 (~3200) Point of sale across the country

EXPANSION AND NEW INVESTMENTS: The Company is adding 1 lakh sft in Hassan, Karnataka for raw material storage, raw material quality and elastic preparatory processes. The facility is expected to be commissioned in the second half of FY22. In Odisha, IDCO has allotted 28.8 acres of land in Ramdaspur Village in Cuttack District. The Company will set up a manufacturing facility for Men’s innerwear Modern Classic vertical. The facility shall be a state-of-the-art campus with Central Stores, Elastics, Socks and Cut to pack manufacturing operations. The project has been awarded to renowned contractors to build and meet IGBC certification. Ground levelling activity has been progressing well and the project is expected to be completed by March’23.

Project ‘AARAMBH’- Smart distribution center for finished goods: The Company has also embarked on its journey with 3PL Warehouse Outsourcing model with one of the trusted partner - DHL at Attibele- Anekal MCS facility. It is catering to both our E-commerce & Channel Distribution business requirements. Spread across 2 Lakh Sft., the warehouses are built with best-in-class infrastructure at
par with global industry standards. This is (i) Company’s first mechatronic warehouse for Channel Distribution with minimal human intervention through seamless integration of processes & technology implementation; and (ii) Best in class E-com warehousing model to cater seamless order processing with focus on service quality and speed to market along with improved inventory accuracy and productivity.

Technology, Process Improvement and Modernization
Supply chain planning tool: Project SCORE-BlueYonder: As part of our progress through digitization we are in the final stage of implementation of the enterprise planning tool ‘BlueYonder’. With this, our agility and nimbleness in various areas of demand forecasting, customer responsiveness, improved fulfillment, productivity improvement, cost improvement and inventory optimization shall be a reality.

Narrow tape dyeing: To meet the growing demand for Jockey Women’s products we have added a latest tape dyeing machine in our existing Hassan tape dyeing unit.

PROSPECTS: We are highly encouraged by the enduring strong brand equity, image and leadership of the Jockey brand and the rising strength of the Speedo brand in their respective markets. We will continue our unrelenting endeavor to satisfy consumers with the finest products in terms of style, design, comfort, fit and quality in all verticals: - Jockey Men’s, Women’s and Kid’s Innerwear, Athleisure, Socks and Accessories, as well as Speedo Swimwear and Swim related equipment.

With our strong in-house product development, back-end capabilities, manufacturing expertise and state of the art technology that is continuously evolving, combined with a very strong distribution network, we remain optimistic about the prospects and expect continued healthy sales growth and profitability in the coming years, further consolidating our position in the premium market for Innerwear, Athleisure, Socks, Swimwear & Swim equipment.

Misc. Points:

• Trade receivable are generally on terms of 7 to 45 days
• Advertising and sales promotion 31.8 Cr. (97.5 Cr. in FY20)
• New Products Launched: Caps and Face Mask
• 21,280+ (18500+) Employees
• The Speedo brand has achieved a turnover of Rs. 26 million in the financial year 2020-21 as against previous year sales of Rs. 354 million.
• Jockey brand scored a Brand Equity Index of 4.6 on a scale of ten in the Men’s Innerwear category and 2.9 in the Women’s innerwear category. To put things in perspective, worldwide only 23% of brands across all product categories score a Brand Equity Index 3.0 or over on a scale of ten and only 8% of brands score 5.0 and above.
• During the year under review, on the recommendation of the Nomination and Remuneration Committee, the Company has introduced Variable Pay (VP) ranging from 10% to 30% of the CTC, depending on the grade which commences from Assistant Manager to CEO and the Dy. Managing Director. VP will be paid based on the overall performance of the Company. VP shall be paid after the close of the financial year i.e VP for the FY 2020-21 will be paid in FY 2021-22. Hence, there is significant drop in percentage of increase in remuneration for the Executive Directors and Key Management Personnel.

Market Opportunity:

Disc: Not Invested.

[Vinay_T_M]

Page Ind has announced Q1 FY22 results

While the YoY numbers look decent, it’s the extreme low-base effect that is at play. If we compare the Q1 numbers to FY20, it gives a bright bleak picture. Clocking revenues close to 500 crores compared to 840 crores is indeed a dimmer even after considering covid-19 effects.

Page has said that 61% of all MBOs (~81k) and 100% EBOs are open (935+). During the same quarter in 2019, Page had close to 50k MBOs and 620+ EBOs. ~300 EBOs added even with only 61% active MBOs, this should be close to 50k. This effectively means that people are purchasing lesser from offline stores. Now that they also have Athleisure 2.0 and e-com becoming 10% of sales, it becomes even harder to have a soft spot towards the execution of the management.

They’ve mentioned that cash and cash equivalents stand at 320 crores, down from 450 crores in the last quarter. However, no mention of the balance sheet or the cash flow statement for this quarter

Links
Investor presentation
Q1-fy22 results

[Vinay_T_M]

Good numbers from Page Q2FY22. Co achieved revenues of 1000 crores+ in this quarter. Both revenues and profits grew 45%+ compared to the September quarter of FY21

In spite of the headwinds all cos are facing w.r.t increased raw material and logistics costs, Page has maintained its margins at 21.5% and cash has ballooned up to ₹533 crores.

Page has announced a second dividend interim of ₹150 per share which takes the total dividend payout of this financial year to ₹200 per share (₹220 crores payout so far)

Investor presentation
Q2-fy22 results

[zygo23554]

Page Ind has delivered industry leading revenue growth after almost 6-7 Q’s. Over the past 2-3 years they have gone about category expansion in a quiet manner and might push hard on channel expansion here on. There is a huge market ready for the taking for them across categories in urban India while innerwear should deliver decent growth for them in semi urban India if they focus well there.

Yet to go through the Q2 conf call but data points on how their newer categories are doing should be interesting

Disclosure: Not invested

[Vinay_T_M]

Page Industries Q2FY22 concall highlights:

Investor call recording Q2 - Page Industries - YouTube

Note - Got to applaud the moderator who was very quick to move the queue and made sure more questions were asked during the concall which was not the case for the last two years

For the first time in its history has someone from Page actually talked about the target customers and provided great insights. I think it was Gagan Sehgal, the Sales President and Rahul Shukla (VP) who shared these points. Kudos to them

Avi Mehta - Mcquire

Any material divergence between primary and secondary growth?

• no, secondaries are in line with the primary due to better inventory from the distribute end

Growth trends in October?

• see strong demand

Long term growth expectations 15% or back to 20%+?

• we are expanding aggressively, have a one-billion-dollar dream by 2026

Ravina Reddy - Neridy Investments

Capex required in 2026?

• we are always in the 300 to 400 crore capex year on year (FALSE)

Only 9% topline since last 3-years?

• expanding our capacity to meet the demand, well on track. MBOs above 1 lakh and EBOs above 1000. Juniors 51. So, we are optimistic about the future growth

• men’s innerwear has shown very robust growth, in line with the other segments

Nihal Jham - Edelweiss

The segmental divergence between men’s, women’s and Athleisure?

• growth equally robust across all three major segments, all of them have clocked 40% growth

Shalini Gupta - East India securities

MBOs grew 17% YoY, how’s the geographical expansion of these MBOs?

• 50% MBO growth in Tier 3 and Tier 4 cities. We believe half of our target customers are located in these areas. Ours is a scientific approach
• The nearer you go to the customer, the frequency of the purchase will be more. The cost to serve isn’t big compared to the metro cities. This is self-sustaining. MBOs Pre pandemic 65k to 100k now. We saw repeat purchases in t3 and t4 cities (within two months)

M K Global

Any production/supply chain disruptions, constraints faced in outsourcing?

• 30-33% is outsourced, 2/3rds in-house manufacturing. We learnt from the issues faced in the first wave period and maintained better inventory, better liquidity to suppliers

Women’s growth - what we are changing in the category with the new adverts, what’s our growth ambition in this category?

• women’s range is very well received by the consumers, a dedicated leadership team with higher distribution compared to previous years. Still single-digit penetration. Have tie-ups with many top-quality international designers

Prerna - BNK securities

Did the majority of sales come from the increase in the distribution network?

• modern trade (malls etc) recovered, EBOs and e-commerce have also grown substantially (8-9% of overall sales now)

Gaurav - Axis Capital

Capex in H1 only 30 crores?

• we had stopped production for some time during lockdowns. New capacities are coming up in Q3 and Q4

*Pricing - raw material price trend? *

• average price increase 4-5% in Q1. The raw material price increase is 5% in H1

Samir Gupta - IIFL

Other companies, in general, cotton yarn prices are up 30%. How are we able to deal with it?

• we were investing in new stocks in previous quarters and our inventories were on top of it

Trilok Agarwal - ABSL

Total addressable market?

• We have a footprint in 50000+ population cities. Only 3.5 lakh towns have more than 10000 people; 39 crores is the Jockey target customer. We are targeting to reach 150000 MBOs in the next couple of years

Other expenditure has gone up sharply?

• freight costs, warehousing costs have gone up which has been volume-related cost increases

Shree consultancy

capacity we are operating at?

• 250 million pieces and 80% capex utilisation. We will be touching 400-420 million in the next 3 years

Arpit Shah - Stallion

Men’s innerwear traction?

• it will continue to be a major category for us. I don’t think the equation will change big time. Our mix should remain at the same splits since all the segments are growing at a similar pace. Women’s and Athleisure should do better since the under penetration is high compared to men’s innerwear

How ARS is helping us with MBO growth?

• helped with building the inventory for the distributors. Distributor salesmen have doubled. MBOs who used to order once in two months is now ordering twice a month

Akshay Thakkar - Fidelity

Any future price hikes?

• We always work on 20-21% EBITDA. We set MRPs with respect to the growth projections. We are trying our best to manage the pricing, no price increase this quarter***

Ankit Kedia - Phillip capital

Is the productivity of distributors increased?

• distributors ROI has always been higher than the MBO growth

Will there be cannibalisation between MBOs vs EBOs?

• EBO addition is always 150 to 200 new stores every year is the plan. Our retail presence is only in 350-400 cities. We always geotag each store so that we don’t encounter such situations

Varun Singh - IDBI capital

Thoughts on the emerging competition? We have Amazon delivering in so many pin codes

• Our product quality is unmatched with good distribution. There’s space for more than one player. Growth in the market is rapid. Confident of maintaining the growth. Don’t think competition is going to affect our growth. We have a long way to grow in Athleisure
• Even with lesser entry barriers due to Amazon, we are continuously monitoring the market well

Asish Kanodia - Ambit

Volume per retail outlet has declined by 25-30% compared to the MBOs?

• after the pandemic, key outlets in high streets have struggled but the smaller outlets have grown well. We get closer to the consumer by geo-tagging our outlets via maps and comparing it to the population heat-map. I don’t think we’ve degrown. Some big outlets have struggled due to changes in consumer buying pattern and we expect them to normalise as the urban economy picks up

[Vinay_T_M]

GST On Apparel, Textiles And Footwear Up From 5% To 12%, Effective January

This is seriously bad news for Page in short term and their pricing power will be tested to the limit. Will be interesting to see how the competition will react to this as well

[sonyjoy]

Page has done a great job at execution all throughout and it was able to take the average ticket size higher in an otherwise low price sector. Same with margins. Their exclusive outlet approach also was a first.

Currently many others are piggybacking on this exact playbook. Though it’s not easy for them to change their brand perception, they will keep creating sub brands and spend serious money on marketing to get as close as possible. There will be margin pressure in this segment too.

It’s reading at ~10% below is peak. It’s a high PE stock. For existing (long term) investors, is this a hold or a sell?

[Vinay_T_M]

Stellar results from Page - Q3 FY22

• Revenues have touched 1190 crores, up 28% YoY

• Operating margins at 21.1% vs 24.4% YoY, due to higher raw material prices (they’ve even mentioned this in the investor presentation which is rare to see)

• Clocked EBITDA of 251 crores vs 226 crores YoY, up 11%

• PAT 175 crores, up 13.5% YoY from 154 crores. PAT margins at 14.6%

• Cash and cash equivalents at 556 crores, slightly higher than the 533 crores they had three months earlier

• Looks very likely to be another quarter of heavy raw material stocking up

Page has announced a third dividend interim of ₹100 per share. The total dividend payout for this financial year will be ₹300 per share (₹330 crores payout so far). Payout will be > 75% assuming they grow at the same pace in Q4

Q3-FY22 results
Q3-FY22 investor presentation

[Vinay_T_M]

Page Industries Q3FY22 concall highlights:

Investor call recording Q3 - Page Industries - YouTube

V Ganesh, CEO

• increased capacities in-house and outsourcing as well
• increase demand in modern trade
• 28% revenue growth you, 9.3% qoq
• 24.6% volume growth yoy, 5.3% qoq
• all channels are active
• 1030 ebos and 105k mbos
• introduced shift operations in manufacturing to increase compliance (social distancing etc) and also to increase production to meet demand
• athleisure: investments we made in 2019 to setup a new team is yielding good results; rapid expansion of our distribution system. New ebos have special focus in Athleisure. It’s a key focus area for us
• women’s: high growth opportunity. Built an extensive team in the last 4-years. Growing at a very healthy pace, have aggressive plans to expand the segment; biggest pillar for our business reaching $1bn target
• 53 ebos for jockey junior; special channel partners in 50-cities. Dedicated sales team for women’s and kids segment starting this year
• 2850+ cities and towns, see great potential in rural, t3 and t4 cities; strengthening distribution in a phased manner
• confident of maintaining growth

K Chandrasekhar, CFO

• ebitda margins of 21.5% vs 24%, significant raw material price increase. Increased ASP.
• gross margins at 40%, pat-m at 13.6%
• 556 crore cash and cash equivalents
• 593.5 crore net working capital
• 695 crore inventory, increased to support increased demand

Q&A

Avi Mehta - Mcquire
Q) 5% price increase was mentioned in q2; was it more in q3?

• 8% price increase in Dec-Jan; was planning for further increases due to increase in input cost inflation but didn’t do as the gst rollout (5 to 12%) didn’t happen
• ebitda margins comfortable at 21-22% margins

Q) this time we excluded sale of raw materials to vendors and sale of non-movable inventory, was that an on-off in the last quarter?

• we sell raw material to the outsourced vendor at cost that doesn’t contain margins. To remove this distortion, from this quarter we are reporting the finished goods sold as well

Tejas Shah - Spark capital
Q) ebo expansion: how much runway do you see in next two-years and what’s the break-up geographically

• exceeding targets this year; opening one store (ebo) every two days. ebos present in 360 cities vs 2850 cities overall. Uniform expansion in t2, t3 and metros
• opened stores in cities with 50000+ population
• entire operational activities in expansion is done by taking logistics, supply chain, raw material sourcing, it infra for Ecom are fine-tuned accordingly

Ankit Kedia - Philip capital
Q) 1.05 lakh mbo; what’s the split between men, women’s and athleisure

• we do range selling; don’t do just one category
• percentage is pretty healthy; men’s base is 60-70% with Athleisure + women’s segment too

Q) any pause in strategy in mbo expansion?

• 105k vs 65k during covid; ~50% new stores opened in t3 and t4 cities, range selling and category upselling in existing outlets as well

Q) considering there were issues with supply chains this year, how are we managing it in ecom?

• supply chain issue was a good problem created due to increased demand, in a much healthy situation currently
• have own ecom warehouse, not happening regionally, it’s done via a central warehousing strategy (hub-spoke model?)

Sanjay Satpati - Ambit
Q) top-line growth is good compared to many consumer durable cos who also struggled with margins, any comments?

• it’s due to the power of the brand, product acceptance, value for money proposition; passion for excellence in providing a superior quality product to the customer
• we never shied away from investing in retail footprint even during the pandemic
• YTD, we could’ve done much better as demand was more than we expected and hence did a big catch-up in the last few quarters. Going forward, we’re positive
• topline $1bn by fy-25 long-term business plan, we are very much in the trajectory, might achieve faster than expected

Gaurav - Axis Capital
Q) Percentage contribution of ebos in overall sales contribution

• 1/3rd total sales should be from ebos

Q) 24% volume growth, how much of it is pent-up demand?

• don’t think this demand is pent-up, it’s real demand. Last 6-months, markets continued to be normal and we’re seeing similar/better demand

Chirag - Valuequest
Q) 24% volume growth vs 28% revenue growth, is the pricing element only 3-4% yoy?

• 5% price increase in q1 and 8-9% in Q4

Q) Bangladesh plan?

• added one more vendor partner and are very choosy in it, we don’t just outsource products, we outsource the execution team. Our vendor growth in Bangladesh will depend on how well the vendor partners deliver. Didn’t go there for pricing; it’s more to do in achieving the volumes

Q) advertisement spends for this FY?

• ad spends 29.4 crores in q3, 71.4 crores 9-months

Bharat Shah - ASK
Q) Technology investments were mainly for hygiene and informational value, where are we in the journey to enhance the brand resilience and character of the co?

• it’s a continuous journey, data protection blah blah; invested into supply chain, demand sensing and planning
• women’s business has real-time information to improve productivity
• investments in hr, ims which are also continuous in nature, Salesforce automation has helped our sales team look at which product needs to be pushed, purchasing pattern of a retailer, stock lying at the distributor. Have real-time management alerts

Q) Logistics - Can we expect improvement due to tech investments?

• our main aim is to reach the product faster to the consumer; warehouse expansion to have better reach to the market which would also improve logistics cost which is well under control; need to improve stock health of the distributor which would reduce the inventory cost

Q) Have we decisively broken out from the rut we were in due to lesser favourable market situation?

• you can count on us, we are setting $1bn target only after seeing strong demand + confidence in executing it as seen in the recent quarters; fully geared up to deliver good results. We are pretty focused, good management team…

Q) logistics + warehouse cost as a percentage of revenue?

• around 2% of revenue, slowly coming down (2.4% to 2.2% now)

Ghosh - Franklin Templeton
Q) how are we thinking about inorganic growth opportunities as we have decent liquidity under disposal?

• not looking at any acquisition; have lot of growth/opportunities organically. Also, we can’t introduce new products in the same category as part of the license with Jockey

Q) what is the percentage shelf space we get in mbos?

• depends on each mbos (some accept only kidswear, women’s etc + people start up small and then expand); difficult to put up a hard number

Trilok - ABS
Q) demand split across categories? And urban vs rural markets?

• all categories have done well
• since market penetration has been low in women’s + athleisure, the growth will be accelerated going forward. Men’s innerwear has grown tremendously well (rural? looks to be distribution driven)
• retail footprint expansion: 45% has been done in rural. Not too much to say as we’ve grown in cities as well. Similar growth.
• Athleisure + other non-innerwear products should be 1/3rd of the sales; Percentage-wise, the split has not shifted much in the overall revenue pie

Sameer Gupta - IIFL
Q) mbo expansion has grown 65k vs 105k while 9m growth is 7% topline; are we targetting rural markets, predominantly smaller stores?

• expansion is driven by looking at the demand/opportunity
• product expansion, more offerings are done as well; looking at productivity-related growth going forward
• unorganised to organised shift has happened but we’ve done comparatively better due to product strength + value for money approach
• Gagan (chief retail) and Rahul (chief sales) are working hard to improve the reach

Arpit Shah - Stallion
Q) market route to expansion since mbos have expanded big time last two years? Are we going direct to retailers or via the distributors?

• geo-tagged all mbos; this is not rampant growth, it’s strategic to get closer to the customer
• all mbos are serviced via distributor as it has proven successful for us till today
• all new outlets are seeing throughput from day-1; no subsidies given to distributor due to increased demand

Q) why lower price hikes compared to the competition? Also, how have we still maintained margins in spite of inflationary headwinds?

• budgetary controls, strategic moves by building inventory, raw material movement, aggressive operational cost controls, want to touch the price to the barest minimum extent and deliver better volume growth

Q) how are we calculating volume growth?

• we look at the number of pieces qoq, you. No change in volume recognition policy

[Vinay_T_M]

Sunder Genomal has resigned as the MD of Page Industries (effective from May 31st, 2022) and will continue as a non-executive director of the co

It will be interesting to see if they appoint his son (Shamir) as the successor or seek help from professional management

Announcement

Update: V S Ganesh, the current CEO of Page has been appointed as the Managing director (effective June 1st, 2022)

Announcement

[Chumantar]