Another excellent quarter from Page
- Q4 revenues are up 26.2%, while volume growth was 8.7%.
- Operating profits grew 61% in the quarter backed by volume growth lead operating leverage.
- EBITDA margins touched 24%
- Announced a ₹70 per share 4th interim dividend for the year. Dividend per share for fy22 will be ₹370 (~410 crores)
- Full-year (fy22) revenues are up 37% (volume growth - 29%)
- Operating profits grew 52% and EBITDA margins were 20.2%. GM ~40%
- 110k MBOs, 1130 EBOs and 2800 LSFs spread across 2850+ cities
- Speedo: 1,340 stores, 26 EBOs and 12 LSFs spread across 90+ cities
Q4-FY22 results
Investor presentation
Concall highlights:
VSG (CEO):
- growth was broad-based (distribution, modern trade and ecom)
- digital initiatives, new product launches, retail expansion, and agile supply chain were the drivers of growth
- the supply chain is back on track
- experienced very high inflation trend (including packaging, logistics and cotton); measured price increase and optimum use of inventories sufficed our margins in spite of the inflationary pressures
- all categories are growing; equal focus on t3 and t4 cities as with t1 and metro
- speedo is back on track
- 27k team members, channel and supply partners were working very closely with us
- outlook very very bullish; firing on all cylinders to continue and sustain growth
KC (CFO):
- the best ever financial year in history
- gross margins at 43%
- building high inventory; hence cash down to 283cr (vs 435 cr fy21)
- the net-working capital is 631.7 crores (vs 512.8 crores in FY21); nwc days have come down to 60 days
- inventory stood at 950cr (vs 554 cr)+ at 92 days vs 71 days
Q&A:
inventory levels change of 150 cr+ vs Q3
- during the pandemic, we had to dig to reserves (inventory); most stock is high-selling stock making sure there are no opportunity losses like we had last year
any new price increases taken/planned?
- price increase of 8-9% in Q3 and 5% in Q1; no further price hike since December
gross margins dropped by 200bps but ebitda margins up by 500bps, any explanation for the same?
- price increase was 8% in Q3 lead to higher margins; operating leverage kicked in q4 (opex as a % of revenue has gone down)
- we are fine with 40% gm and 20-21% was ebitda margins
Volume growth for the quarter and full year?
- volumes for q4: 50 vs 46; 191 vs 148 for full year
revenue mix?
- we have stopped sharing that; growth is similar across categories. Athleisure was higher during the pandemic
ebitda margins sustainability at 24%?
- margins are dictated by input costs, we are always a value for money brand for consumers; costs (raw material costs) are beyond our control as of now, can’t say for sure if we can maintain these margins
raw material inflation?
- yarn prices have doubled in the last 14 months; still seeing further upward trends in prices as of Q4
sales and marketing spends are up this quarter, can we control this?
- not stopping this; they are very essential for the brand to capture the shelf space
- we have implemented automation to enable leadership manage better productivity; discretionary spends like travel are in control, to strengthen our leadership, new CPO (Ravi Kumar) has been onboarded
query on the productivity of existing stores after 45-50k store addition, how’s the repeat orders and productivity of new stores?
- entire distribution is bottoms-up where we see demand/customer base; it is strategic. we do check if the outlet justifies our brand. New store repeat orders are above 80%, productivity in the second year is higher with bookings coming from other segments
- a target of 1.5lakh+ stores in two years
other expense is 11% vs 16% average, what lead to this and is it sustainable?
- no moderation of overheads; all the expenses have grown but as a percentage of revenues is down; 2.5% in ads for the last two years
can we expect higher margins due to Athleisure coming in?
- we will be happy with 20-21% ebitda margins, don’t want to increase prices further. Want to compensate due to better operating efficiencies
kidswear trajectory?
- growth in-line with other categories; merged with Women’s in retail touchpoint. Present across 25% of the retail touchpoints
metro vs t1 vs rural markets? any pressure points in rural markets due to higher pricing?
- growth is similar across all segments (metro, t1 and rural); opportunities are higher in t3 and t4 cities
- EBOs registering double-digit same-store growth
rural - select few products at affordable prices; are they present in other stores as well?
- there are no specific products for rural, all products launched in rural markets are available in cities too
international markets?
- seeing huge potential; dedicated leadership. Focus on the middle east (mainly EBOs, up from 4 to 8)*; Sri Lanks is struggling. International is 1% of revenues. It is a franchise-based model like we do in India, the only change is that the partner would manage multiple channels
revenue growth, volume growth target for next 2-3 years?
- we have set a target of $1bn by 25-26 (we may even accelerate). We are now looking at aspirations of $2bn and beyond
- fy22 was the first time we took two price increases; the outlook is based on input cost inflation. Happy to see that premiumisation is happening as we expected
capacity, utilisation and expansion plans?
- utilisation is close to 80% (in-house); capex plans in-line with 3-year growth plans
- Odhisa plant will be operational by q4 fy23
- target: 70-30 (in-house vs outsourcing). Mostly we will stick with the same vendor partners for outsourcing. Currently, outsourcing is 33%
speedo recovery?
- we see long term potential in the brand; prudent for us to stay invested. Even with the reduction in EBOs, volumes are flat and early days w.r.t profitability. India is the fastest-growing swimwear market
store expansion in fy22: MBO (Gagan) up 42% and EBO (Rahul) in 21%; how do we prevent cannibalization of sales?
- MBOs expansion was done by geotagging existing presence; we only expanded new stores strategically to service the customer better. Existing stores have grown (sales) too along with the new stores. Growth is healthy double-digit; we monitor it monthly
dividend distribution policy?
- 50% of PAT (also a function of cash; higher sometimes like we did in 2019)
fixed asset turns?
-
12 to 13; should be stable even with the upcoming plants in Odisha
-
existing capacities are not good enough to serve the increasing demand, hence we are increasing capex; we mostly manufacture elastic too for backward integration. We have planned investments looking at long term; no brownfield, greenfield expansions only
is our customer base expansion low versus our volume share gain ?
- we are getting more wardrobe-shelf of the same customer due to increasing wallets, more products ; also onboarding new customers
Is any downtrading seen in the customer base due to high inflation?
- we don’t have a high asp; sell essential products; relevant across the year. Customers can downgrade seasonal products but we see this as an opportunity
