MOSL: PAGE INDS. (Buy)-Strong volume growth continues-deserves premium valuations
​Page Inds.: Strong volume growth continues; deserves premium valuations
(PAG IN, Mkt Cap USD2.5b, CMP INR16216, TP INR19600, 21% Upside, Buy)
- Net sales grew 22.5% YoY to INR6.96b (our estimate: INR6.81b), with 13% volume growth. Men's innerwear grew 20% (11% volume growth), women's innerwear grew 24% (15% volume growth), and sportswear grew 26% (21% volume growth). Speedo sales grew 8% (14% volume decline).
- Gross margin contracted 60bp YoY to 54.2%, missing our estimate of 59.1%. Employee cost (as a percentage of sales) declined 40bp YoY and other expenses fell 60bp YoY, resulting in EBITDA margin expansion of 40bp YoY to 19.6%. EBITDA grew 25% YoY (our estimate: 37.7% YoY) to INR1.37b. Adjusted PAT grew 25.5% YoY to INR853m, lower than our estimate of INR986m.
- Management interaction takeaways: (1) July sales were impacted, as retailers were under pressure due to regulatory issues relating to GST, but sales have picked up in August. (2) Yarn costs have been stable. (3) Gross margin was affected by higher trade discounts - up from 1.8%-2% to 4% for FY18.
Page Industries is a garment manufacturing group based in India. Co. is the exclusive licensee of JOCKEY International for manufacture and distribution of the JOCKEY® brand Innerwear/Leisurewear for Men and Women in India, Sri Lanka, Bangladesh, Nepal and United Arab Emirates. Co. is also the exclusive licensee of Speedo International for the manufacture, marketing and distribution of the Speedo brand in India (products include swimwear, water shorts, apparel, equipment and footwear). Co. maintains manufacturing operations spread over 9 complexes in Bangalore and Hassan in addition to 25,000 plus retail outlets in 1,200 cities and towns across India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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