There was comfortable margin of safety at 3900 three months ago. Now at 5400 it has moved from fair valuations to rich valuations. So the margin of safety has reduced considerably. But looking at the market frenzy, you never know what kind of valuations are assigned to the good quality stocks like Page.
looks like there is buying panic in page counter.
It seems those left behind all this while, citing expensive valuations are themselves jumping in to buy.
as vijay mentioned in previous post, the attractive valuations are no more there.
It is amazing the kind of wealth Page has created even in the recent past.
The basic difference between Page and other stocks in the Value Pickr portfolio is the kind of large portfolio allocations(25-30%) one can do here and still have a sleep sound at night.
| Market Price as on | Returns CAGR | ||||
| Stock | 30-Nov-11 | 30-Nov-12 | 30-Nov-13 | 2 Years | 1 Years |
| Page Industries | 2251 | 3347 | 5410 | 55% | 62% |
| VP Portfolio Median Returns: | 91% | 71% | |||
| Ajanta Pharma | 113 | 253 | 980 | 194% | 287% |
| Astral Poly | 55.5 | 140 | 250 | 112% | 79% |
| Mayur Uni | 87.4 | 232 | 341 | 98% | 47% |
| Kaveri Seeds | 452 | 1320 | 1550 | 85% | 17% |
| Poly Med | 133.5 | 208 | 338 | 59% | 63% |
| P I Industries | 103 | 105 | 232 | 50% | 121% |
Very clear thinking Prabhakar indeed; May I ask you about the name of your second stock, in case you do not have an issue…
HowKenneth Andrade (IDFC Premier Equity fund) chose PAGE,
Its agenda was clear: Focus on companies which have positive cash flows, almost negligible or no debts on the books and which are dominant players in their industries," Andrade said. “We had a free hand in terms of picking companies without the constraints related to preferences to a particular sector.”
These were the factors that persuaded IDFC to invest, for instance, in garment maker Page Industries, a licensee for Jockey and Speedo. “We met the promoters of Page Industries before the company’s IPO (in 2007),” Andrade said. “We fathomed through our interaction with the company that here is a single-product company with a very strong franchise and never sold a product but basically sold a lifestyle.”
This rang a bell for Andrade as it mirrored the characteristics of GlaxoSmith-Kline Consumer Healthcare, which has been in his portfolio since 2005 and has worked wonders for the fund. Page Industries has been part of the IDFC Premier Equity Fund since 2008. How to apply one viable idea to another industry is one of the key lessons Andrade has learnt in his eight-year association with the fund.
2 Likes
Thanks Rudra for sharing the article. I heard that Andrade has lightened positions on Page (I have not verified the news though…need to check)
Supratik
Yeah his MF offloaded part of FMCG folio [due to overvaluation] and invested in to PSU -PNB, SBI, GAIL and GSPL. It’s been more than an year and this switch is dragging portfolio. As they say nobody can predict timings.
Valuations are certainly in rich area right now. It keeps happening with Page time to time. From my price observation of 3 years whenever Page comes near or below to 30 PE forward it becomes attractive (example near 4000 few months back). It also can be bought when it falls about 10% from highs and price stabilizes a bit.
As per the question of whether 25% could be made here, it’s possible till the sales growth is above 25%. We are not going to hold it if sales growth reduces consistently. Though difficult to predict, investors should be able to get out at reasonable valuations whenever they do.
Disc - Page is 38% of my folio. Not complaining a bit 
but a lot of bias.
I concur with Jatin. Did similar DCF analysis to understand what is market expecting from page industries based on current market cap.
I used following assumption
Dividend payout to remain 50% for its growth period and 100% there after
terminal growth rate as 4%
Growth rate 20% to 35%
|
Discount Rate |
Growth Rate |
Length Of Competitive Advantage Period (Years) |
|
15% |
20% |
23 |
|
15% |
25% |
14 |
|
15% |
30% |
10 |
|
15% |
35% |
8 |
|
20% |
25% |
27 |
|
20% |
30% |
17 |
|
20% |
35% |
13 |
|
25% |
30% |
30 |
By above table it seems market has priced it to perfection assuming 15% discount rate and Page to continue growing at least 25% for more than 10 years and growing profits and sales by at least 10 times in 10 years and command valuation of 20 times net profit once growth stabilizes to more or less 4-5.
Over the long term (10 years or more) if any investor looking for return more than 15% from in this counter might be disappointed, of course in short run anything can happen (and I might look like fool).
Disclosure: Currently invested but planning to sell on any rise since I would like to have return at least 20%-25% from equity investment over the long term.
Regards,
Dinesh
We can keep debating on price and valuation but here’s some counter arguments that statistical model don’t capture :
- Jockey : As per couple of market research, market size for under wear segment is 10,000 Crores and growing at healthy rate. However when people switch from unbranded category to branded, market itself grows. Eg: If people are using unbranded undies costing Rs.40-50 and when they switch to branded costing Rs.150-200, that itself expanded overall market size by 3 times. Hence market size is much bigger than survey/estimates of 10K Crores.
With the way they are growing and killing all competitors, it can become Gillette or Coke of undies world.
- Speedo : Recently they entered into swim wear market through Speedo. Swim wear market is small but growing at 25-30% and can be huge in next 10-20 years.
It looks like Page is emerging as company which most of us are failing to understand. I read in this blog and elsewhere how many of us sold early [including Prashant Jain of HDFC and Kenneth Andrade]. I also sold few times only to realize mistake and re-enter at higher price later on. Finally I decided to keep riding unless Page falters it’s growth or market gets saturated but with 875 Cr. sales and huge market to serve 120 Crores of people, it may take long time for the slowdown.
dinesh,
You can back test the numbers with data from say 2008 or so and find out how this model works with the then existing price… whether it suggested any upsides at when say price was 1500 or 2000 or 2500… that should provide pointers as to whether these stastitical models are efficient or not.
hitesh.
“Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to the amount and timing of cash flows into and from the business.” - Warren Buffet (emphasis mine)
Surp, risinglyPage shot up to 5666 intraday on heavy volumes. Enjoying the ride.
A good thing is to watch CNBC Making it Big - episode of Rupa Ltd.
The MD of Rupa Ltd beautifully explains what is helping the undergarments industry.
Disclosure : I am holding Page since 1500 levels, dont intend to sell anytime soon
Superior results out!!!
Sales grows from 219 to 305 crs - 39% increase
NP grows from 25.4 crores to 34.6 crores - 36% increase
Interim dividend - 15/- share. Total dividend till now (9 months) - 44 Rs.
9 months eps at 106 compared to 79.7.
Possibility of the year ending with 130-135 EPS with 60/- dividend.
This one is growing too good. I have heard management has shared a detailed breakup of segments etc. Will need to check, and will share if I catch a hold of it.
The company had previously mentioned that they intend to keep margins intact at 22% and it keeps pumping margins above 22% into brand building, thus making it difficult for competitors to survive. The first mover advantage too is huge.
I have an inkling that the womens segment is leading the growth for them. Plus they are investing in building the Speedo Brand.
I remember one person saying : Page bechne ke cheez nahi hai. !!
Found this portion from the Kotak’s update interesting
The company continues to deliver better results. Page reported Q3FY14 sales at Rs 300 crore (up 39% y-o-y; up 5.2% q-o-q), ~9% higher than our estimates. Sales growth (y-o-y) was driven by 18.8% growth in volumes, 6% excise benefits retained by the company (excise duty on apparel was dropped by the government in FY14) and +14% impact of price/mix. Leisurewear and brasserie categories outperformed with sales growing 58% and 91% y-o-y, respectively. The company reported Q3FY14 Ebitda at R58 crore (up 44% y-o-y; down 11% q-o-q) with Ebitda margins at 19% (up 60 bps y-o-y).
Emphasis Mine: This is something we discussed before, that those 2 categories can take the game to next level.
From the details shared by management
Volume Growth over 3rd quarter
Men’s 10.5%
Womens 21%
Bra 71.6%
Leisure Wear 37%
Total 18.5%
Value Growth over 3rd quarter
Mens 25%
Womens 35%
Bra 90%
Leisure Wear 58%
Total 39%
Breakup of Sales Value
Mens 51%
Womens 11%
Bra 7%
Leisure Wear 30%
Speedo 1%
Breakup of Volumes
Men 62%
Women 16%
Bra 4%
Leisure 19%
Speedo 0%
1 Like
From the details shared by management
Volume Growth over 3rd quarter
Men’s 10.5%
Womens 21%
Bra 71.6%
Leisure Wear 37%
Total 18.5%
Value Growth over 3rd quarter
Mens 25%
Womens 35%
Bra 90%
Leisure Wear 58%
Total 39%
Breakup of Sales Value
Mens 51%
Womens 11%
Bra 7%
Leisure Wear 30%
Speedo 1%
Breakup of Volumes
Men 62%
Women 16%
Bra 4%
Leisure 19%
Speedo 0%
No. of pcs sold in 9 month79,547,270 (7.9 Crores)