10 23 2007 (ILandFS Inve) Buy - Ilf00756

Branded Apparels
Institutional Equity
Page Industries
Jayesh Sundar Ride with the Jockey

+91 22 67069944 Initiating coverage with a BUY: Page Industries, the brand
Buy
Jayesh.sundar@investsmartindia.com
leader (with its Jockey brand) in the premium and the mid-
premium segment of the innerwear industry is expected to
Rs435
post a strong growth in revenues and net profits of 35% and October 17, 2007
50% respectively between FY07-FY09. The stock trades at a Market cap
Shareholding (%)
discount to other apparel and accessory brands and its Rs bn 5
Foreign Promoters 48.2 current valuations do not capture its strong return ratios US$ mn 123
Indian Promoters 24.1 (RoCE and RoE of 91% and 42% respectively in FY07). Hence, Avg 3m daily volume
FII’s 6.5 6,790
we initiate coverage with a BUY.
MFs 13.2 Avg 3m daily value
Others 8.0 Page Industries’ Jockey brand has emerged as the market Rs mn 3
leader in the premium innerwear market, and is the only Shares outstanding
innerwear brand in India to be awarded the ‘Superbrand’ (mn)
status 11
Share price performance Reuters/NSE
The company has a strong distribution reach across India, PAGE.BO/PAGEIND
52-week high/low (Rs) 489/240
covering 15,000 retail outlets and thus establishing itself Bloomberg
-1m -3m -12m
as a pan-India player PAGIN
Abs (%) 2.0 8.7 -
Sensex
Rel* (%) -23.5 -16.9 - From FY07 to FY09, we expect Page Industries’ revenues
18,716
*to Nifty and net profits to increase at a CAGR of 35% and 50% Nifty
respectively. This growth will be driven by the company’s 5,559
increased focus on the fast growing women’s innerwear
Stock chart segment, expansion of its distribution network, and
widening of its product portfolio including expansion into
500 leisurewear and sleepwear. With a strong pipeline of new
400 and innovative products Page Industries’ market share in
300 the men’s and women’s innerwear is likely to increase
200 going forward.
M-07
M-07
J-07
S-07
Valuations: Despite, Page’s superior business model,

market leadership in mid-premium segment, significantly
higher and sustainable return ratios and a strong visibility
for a robust growth over the medium term, it trades at a
discount over other apparel and accessory brands. We
initiate coverage with a ‘BUY’ rating and a price target of
Rs515, which discounts the FY08 and FY09 EPS by 20X
and 15X respectively.
Div
Year-end Sales YoY EBITDA YoY NP YoY EPS YoY PE EV/EBITDA PSR PBR RoE RoCE DPS Yield
March (Rs m) (%) (Rs m) (%) (Rs m) (%) (Rs) (%) (x) (x) (x) (x) (%) (%) (Rs) (%)
FY2006 1017.8 194.0 - 113.9 - 467.7 - - - - - 118.7 81.5 227.6 -
FY2007 1368.6 34.5 280.7 44.71 170.3 49.5 15.3 - 28.5 17.1 3.55 7.2 42.4 90.6 5.0 1.1
FY2008E 1904.6 39.2 426.7 51.99 281.6 65.4 25.2 65.4 17.2 11.9 2.55 5.4 35.8 38.7 5.6 1.3
FY2009E 2533.9 33.0 569.9 33.56 372.8 32.4 33.4 32.4 13.0 8.8 1.9 4.0 35.5 42.2 5.6 1.3
¾ 1
Branded Apparels
Page Industries
Company Background
Page Industries was promoted by Mr. Sunder Genomal in 1995. Page is the sole
licensee for manufacturing and marketing products of Jockey, U.S.A. in India, Sri
Lanka, Bangladesh, Nepal and Maldives. Initially, the brand was launched in
Bangalore in 1995, and launched in other cities over the next two years. Today, the
Jockey brand is a synonym with innerwear products, establishing its presence as a
leading brand a pan-India level.
The Genomal family has also been the sole licensee for the Jockey brand in
Philippines for the last 47 years. The family has been well-associated with the
brand and its products, and has vast knowledge on the dynamics of the innerwear
industry. Expansion into India was natural for the promoters, given their Indian
origin. Under the license agreement, Page Industries pays a royalty of 5% of net
sales to Jockey International Inc. (USA). Page Industries’ license agreement with
Jockey is valid till 2020.
Mr. Sunder Genomal is the Managing Director of Page Industries and manages the
entire operations of the Indian licensee business.
Over the years, Page Industries has built a strong brand image for Jockey by
positioning it as a premium brand. The company has been the pioneer in launching
innovative premium products in the men’s innerwear segment; this has paid off as
one of the key strengths of the company. Domestically, Page Industries initially
started with the men’s range of innerwear; it launched its lingerie range in 1997
under the Jockey for her umbrella. The company has further diversified its product
portfolio to include sportswear, loungewear, and products such as cotton socks,
polo t-shirts, tracksuits, and thermal wear.
Page Industries has been focusing on distribution and marketing, the critical pillars
of any brand. The company has set up a nationwide marketing and distribution
setup, ensuring wide availability of the products in 15,000 outlets across 1,100
cities in India. Currently, Page Industries operates eight factories within the same
premises in Bangalore; these facilities have an installed capacity of 1,026 machines
with an annual capacity of 33mn pieces per annum (partly on a double shift basis).
¾ 2 Page/Branded Apparels
Branded Apparels
Page Industries
Product profile
Table 1. Product portfolio

Categories Products Positioning
Men's Innerwear Vests, Briefs, TrunksMid-premium to Super Premium
Women's Innerwear Brassieres, Panties, Sports top, Mid-premium to Premium
Camisole, spaghetti tops
Thermal wear Winter wear for men and women Premium
Lounge wear / Leisure wear Bermudas, Boxers, Jersey Premium
Casual wear Polo shirts, T shirts Premium
Source: IISL research, company
Table 2. Sales breakup and growth trend

(% share) FY04 FY05 FY06 FY07 CAGR (%)
Men's Innerwear 78 75 74 73 23.4
Women's Innerwear 8 9 12 14 57.5
Leisurewear and others 14 15 15 13 29.9
Total 100 100 100 100
Branded Apparels
Page Industries
Business Analysis
Focused in premium segment

Within a decade of its launch in India, the Jockey brand has emerged as a leading
premium brand in the Indian innerwear industry, with a dominant share in Men’s
wear.
Domestically, the men’s innerwear industry has seen the emergence of a number of
regional players with few of them having a pan-India presence. Jockey and VIP are
the only two brands in the men’s segment having a pan-India presence. Since VIP is
more a mass market brand, Jockey stands apart as the only well-established brand
in the premium segment, across the four regions in India.
Table 3. Innerwear industry: Top10 preferred brands
Brands % of total scores Target market
VIP 10.2 Economy - Mid-premium
Jockey 9.0 Mid-premium - Super premium
Rupa 3.1 Mid-premium
Lux 2.8 Economy
Bodycare 0.8 Mid-premium
Bapi 0.7 Economy
TT 0.6 Economy
Neva 0.5 Economy-Mid-premium
Marks & Spencer 0.3 Premium-Super Premium
Libertina 0.3 Economy
Source: IMAGES-KSA technopak study
Table 4. Men’s innerwear industry - Key players

Super Premium Premium Mid-Premium Economy
Avg Industry M.R.P 134 112 74 37
Amul 9
Body Care 9
Chromozome 9 9
Crocodile 9
Dollar 9
Euro 9 9
Gen X 9
Hanes 9 9
Jockey 9 9 9
Peter England 9
Rupa 9
Triumph 9 9
Van Heusen 9
VIP 9 9
Source: IMAGES Business of fashion, August 2005
* Brands classified on the basis of best selling price points
Branded Apparels
Page Industries
As per the study conducted by IMAGES-KSA technopak, Jockey is the second most
preferred brand in the overall innerwear segment, after VIP, the mass-market brand
(see table 3). Thus, clearly, Jockey stands out as the most preferred brand in the
premium segment, scoring far ahead than other premium brands such as Body-
care, Triumph, and Hanes (see table 4). Moreover, within this segment, Jockey is
the only men’s innerwear brand in India to have a strong presence across the mid-
premium to the super premium segment. Thus, it is well-poised to capture both the
growth in volumes and value.
Jockey’s wide acceptance in these markets is evident from its status as the largest
selling innerwear brand in Shoppers Stop, one of the largest chains of departmental
stores in the country.
A strong brand image, pan-India presence, and wide-acceptance among its target
customers has enabled Jockey to earn the distinction of being the only innerwear
brand in India to be awarded the ‘Superbrand’ status by Superbrand India.
Aggressive foray into women’s innerwear segment

Despite having a small product portfolio and being a late entrant in the women’s
premium innerwear segment, Jockey has established its foothold in this market
within a short period.
Jockey entered into the innerwear segment in India with the launch of the Jockey for
her range of lingerie, introducing eight products in this segment. The strategy of
offering premium products with a value-for-money proposition has enabled the
company record a growth of 48% CAGR for the brand between FY03 and FY07.
Currently, Jockey stands among the top three premium women’s innerwear brands
in the country (see table 5). In the women’s segment, brands such as Lovable and
Enamor compete with Jockey in the premium space.
Branded Apparels
Page Industries
Table 5. Women's innerwear industry - Key players

Amul 9
Bodysecrets 9 9
Bodycare 9 9
Dollar 9
Dreams 9
Enamor 9 9
Euro 9
GenX 9
Hanes 9 9
Jockey 9 9
Lasenza Lingerie 9 9
Little Lacy 9 9
Lovable 9 9 9
Splash 9
Triumph 9 9
VIP 9
Source IMAGES Business of fashion, August 2005
Strong distribution and marketing set-up

In a bid to establish itself as a premium brand across India, Page Industries has
established a strong distribution network across the major markets in the country.
The company penetrates the domestic market through a network of 274
distributors across India. Catering to 15,000 retail outlets, Page Industries’
distribution reach is the largest among other premium brands in the country such
as Triumph, Body care, and Hanes (see table 6 and 7).
Page Industries is not only aggressive in adding new distributors but also ensures
high quality of its distribution network by following a stringent qualification process
for selecting distributors.
Page Industries has also set up 18 exclusive stores in large malls and prime high
street locations; this is significantly higher number than its competing brands. The
only other innerwear brand to have exclusive stores is Triumph, a women’s lingerie
brand, with just two stores. Exclusive stores enable the company to strengthen its
image and increase the awareness of various products under the Jockey brand.
Branded Apparels
Page Industries
Table 6. Innerwear brands: Comparison of distribution reach
Exclusive stores Format stores MBOs
(Shoppers stop,
Lifestyles etc)
Jockey 18 50 15,000
Bodycare - - 8,000
Triumph 2 70 230
Hanes - - 2,000
VIP - 3 80,000
Enamor 70 750
Lasenza Lingerie yes (n.a.) - -
Lovable - 60 2,000
Euro yes (n.a.) yes(n.a.)
Source: IMAGES, Business of fashion, August 2005
n.a. - figure not available
Table 7. Page Industries: Region wise distribution strength

Region No. of distributors
West 40
East 19
North 41
South 40
Total 140
Source: company
Unique positioning in Multi-branded outlets(MBO) and hosiery stores creates

a strong entry barrier
MBOs and hosiery stores form an important channel for innerwears as 65-70% of
the sales for the industry take place through this channel. MBOs and hosiery
stores channels comprises 55% of the Page’s revenues.
Page has captured strategic space in such stores through point of purchase
material such as dispensers (which display the products). Hence, the company not
only has a strong presence in MBOs across India, but also has higher visibility in
such stores. This has created a strong entry barrier for new and upcoming brands
as it is difficult to replicate its strong distribution network and capture space in
these retail outlets.
Integrated business model; yet asset-light

Unlike some of its peers (who outsource a large part of the production), Page
Industries follows a policy of manufacturing all its products in-house. The company
operates state-of-the-art automatic cutting machines and has an installed capacity
of 1,026 stitching machines that are capable of manufacturing 33 mn pieces
annually (partly on a double shift). The company follows a stringent manufacturing
process of bar-coding, enabling it to monitor the work-in-progress and the
productivity levels in its factory. In-house production enables Page Industries to
Branded Apparels
Page Industries
maintain a strict control on the quality and the packaging of its products, an
essential parameter for maintaining a premium positioning in the industry.
On account of Page’s unique manufacturing strategy, it enjoys all the advantages of
a fully integrated unit, despite having a small gross block of Rs246mn (18% of
sales). Though Page Industries is not fully backward integrated, it maintains a strict
quality control at each stage of the value chain (see chart 1). For this purpose, the
company purchases its own yarn and employs dedicated partners to do job work for
the knitting and the processing operations. These dedicated vendors, selected by
Page industries, are reputed players in their respective fields of the textile industry
and operate on the latest technologies in knitting and processing.
Chart 1. Page Industries' process flow
Yarn Knitting Processing Garmenting QC and packaging
Procured by Page's Fabric Fabric processing Garmenting done in Conducted in Page's

in-house manufacturing by by dedicated Page's own own factories
procurement team dedicated partners partners factories
Brand building - an increased thrust

The buying preferences of a large section of consumers, especially in the women’s
innerwear segment, are influenced by advertisements. Hence, Page Industries has
been focusing on increasing the brand awareness for its products.
Chart 2. Customers asking retailers for advertised designs
Ocassiona
lly
25%
Never
45%
Always
30%
Never Always Ocassionally

Source: IMAGES-KSA technopak survey
Currently, the company incurs an annual expenditure to the tune of 8-10% of its
sales for marketing, advertising, and promotions. Given the significance of
advertising-spend in the innerwear industry, Page Industries is all set to embark on
an nation-wide brand building programme to provide an increased thrust to brand
awareness. The company would launch ad-campaigns in the television and the print
media for its new and existing product offerings. The national advertising
Branded Apparels
Page Industries
campaigns would be backed by region-specific advertising in local languages. Page
Industries also intends to appoint a brand ambassador for the same. Over the
years, Page Industries has succeeded acquiring the most prominent and strategic
display locations inside the best stores across the nation, owing to the strong brand
equity enjoyed by Jockey. Page Industries will capitalize on this advantage by
modernizing and expanding display space and point-of-sale materials.
For this programme, the company plans to spend around Rs160mn over the next
three years (see table 8). These expenses would be capitalized and written off over
five years. This expenditure would be over and above the annual expenditure on
advertisement incurred currently by Page Industries.
Table 8. Page Industries’ brand building plan
Medium Rs mn
TV advertising 35
Point of sale modules 15
Advertising in magazines and other media 50
Regional advertising 20
Outdoor advertising (posters etc) 20
Brand Ambassador 20
Total 160
Women innerwear - a huge growth segment

Despite having a small product portfolio and being a late entrant in the women’s
innerwear segment, Jockey has established its foothold in this segment within a
short period. The company has offered premium products at a value-for-money
pricing strategy; this has translated into a 48% CAGR growth for the brand between
FY03 to FY07, from this segment. Going forward, the company plans to scale up its
market share in this fast growing segment. For this purpose, the company has
chalked out a new strategy.
Increasing product portfolio: Currently, Page Industries has only 8-10 styles in
the women’s innerwear segment. Since attributes such as the right fit, comfort
and style of products are of significant importance in this segment, widening
the product portfolio would attract more customers in this segment, thus
enabling Page Industries to scale up its market share significantly.
Advertising and product awareness: A wide product portfolio would be
supported by ad-campaigns; such campaigns would increase awareness of
various products under the Jockey umbrella and educate the consumers on
selecting the right product and fit. This would ensure a loyal customer
following.
Boom in India’s organized retailing: Jockey has already established its
foothold in major shopping malls and hypermarkets in India such as Shopper’s
Stop, and Lifestyles. The brand has been the highest selling innerwear brand
in Shoppers Stop for the last three years. The share of organized retail (2%
Branded Apparels
Page Industries
currently) is likely to increase significantly over the next 4-5 years, due to a
sharp increase in disposable incomes, and changing demographics and
shopping patterns. This would spell a natural growth for the Jockey brand, in
line with expansion plans of such large retailers.
Higher distribution reach and thrust on retail outlets would drive growth for the
men’s innerwear
Table 9. Page Industries: Future growth strategy

Categories Growth Drivers
Men's wear
♦ Introduction of competitively-priced twin packs
Mid-Premium ♦ Higher distribution reach to increase presence in Tier II cities and towns
♦ Introduction of a sub-brand specifically targeted to capture the growth
opportunities in the upcoming hyper marts
♦ Aggressive expansion of exclusive outlets to boost brand image and
product volumes
Premium and Super
♦ Boom in the Indian organized retailing industry
premium
♦ Higher brand-building efforts
♦ Introduction of new ranges – International collection and 3D ranges
Women’s wear
♦ Aggressive launch into the bra range with a wide portfolio of
attractively priced products.
Mid-Premium
♦ Introduction of competitively-priced three piece packs
♦ Higher distribution reach to increase presence in Tier II cities and towns
♦ Aggressive expansion exclusive outlets to boost volumes
Premium and super ♦ Boom in the Indian organized retailing industry
premium ♦ Higher brand-building efforts
♦ Introduction of new premium range of sports bras
♦ Launch of new range of leisurewear – pajamas, tracksuits, and muscle
Sportswear
tees.
Source: IISL research
Aggressive pipeline of new product introductions

Page Industries has an aggressive pipeline of new products to be launched in the
next 12 months (see table 10). Apart from the products in the innerwear segment,
the company also plans to introduce new ranges in the leisurewear and the
sportswear segments. This would enable Page Industries to diversify its product
base and ensure that the current growth momentum is maintained over the medium
term.
Branded Apparels
Page Industries
Table 10. New product introductions planned
Expected month of launch
New range of leisurewear (pyjamas, tracksuits) Launched in Q1FY07
Men's super premium range- International collection Launched in Q1FY07

(Cotton, modal, lycra blended)
Additional range of Women's super premium innerwear Q2FY07
Fashion forward - Coloured range of lingerie Q3FY07

Premium range of Sports Bra Q3FY07
Jockey, USA provides a tower of support

Page Industries enjoys access to the strong technical and innovative designing
skills of its parent company in the U.S. and other Jockey licensees across the world.
Jockey, U.S., pools together the wealth of its knowledge base on new product
designs and fashions with the knowledge provided by its 43 licensees across 140
countries. Apart from inputs from the company’s designing team, the inputs from
this network have enabled the company to emerge as the first mover in making
innovative offerings in the domestic markets.
Strengthening the manufacturing facilities
The strong growth opportunities for Page Industries would be supported by the
expansion of its manufacturing facilities, including cutting and stitching machines.
From 853 stitching machines currently, the company would be scaling up the
capacity to 1,576 machines by FY09; the increased capacity would be capable of
manufacturing 51mn pieces per annum. Besides, Page Industries is also backward
integrating into the manufacturing of woven elastics, one of the key inputs in
innerwear production. The facility would have a capacity of 6000 meters per day
and would cater to Page Industries’ entire requirement of woven elastics. The
project, to be executed at an estimated cost of Rs215mn, is expected to be
completed by the end of FY08.
Branded Apparels
Page Industries
Valuations
Despite the following advantages, Page trades at a discount to other apparel and
accessory brands:
Superior business model with a strong and established brand and unique
manufacturing set-up
Market leadership in the mid-premium segment of men’s innerwear
Significantly high and sustainable return ratios
Strong entry barriers
Clear strategy for brand positioning, penetration, and visibility for a strong
growth over the medium term
Long-term license agreement (upto 2020) with the liberty to manage the brand
and products indepedently
We initiate coverage on the stock with a BUY rating and a price target of Rs515. The
target price discounts our FY08 and FY09 EPS by 20X and 15X respectively.
Table 11. Page Industries - Comparative Valuations

Page Ind Provogue Liberty Zodiac Maxwell Titan Ind Raymond
Shoes Clothing Ind
Year FY07 FY07 FY07 FY07 FY06 FY07 FY07
Operating Margins 20.5 14.8 13.9 14.5 15.1 8.7 27.0
Net Margins 12.4 8.4 7.2 6.9 5.3 5.2 8.3
RoCE 90.6 12.5 14.9 21.4 19.5 34.4 8.4
RoE 42.4 10.8 18.9 14.6 20.7 43.1 8.5
Asset Turnover 5.6 6.8 2.1 3.9 1.8 4.1 1.0
FY07
P/E 28.9 97.0 11.9 26.3 18.7 77.6 10.2
EV/EBIDTA 17.3 55.6 10.0 13.0 7.3 39.6 8.0
FY08
EPS 25.7 14.3 - 33.5 - 33.2 -
P/E 15.8 68.0 - 12.5 - 47.3 -
FY09
EPS 34.2 23.0 - 40.7 - 45.9 -
P/E 11.9 42.3 - 10.3 - 34.2 -
Source: Capitaline, IISL research, Bloomberg Estimates
Branded Apparels
Page Industries
Innerwear Industry in India
Chart 3. Innerwear market size and breakup
Innerwear market
Rs 88.3bn
Women's wear Men's wear

Rs 52.1bn Rs 36.2bn
Organised Unorganised Organised Unorganised

segment segment segment segment
Rs 5.2bn Rs 46.9bn Rs 23.5bn Rs 12.7bn
Source: IMAGES-KSA technopak study on Indian innerwear industry
As per the Indian apparel report by Images-KSA technopak report, the Indian
Innerwear market (men’s and women’s innerwear and sleepwear) is valued at
Rs88.3bn. However, almost 68% of this industry is still unorganized with large
nation-wide brands forming a small portion of the overall market. Chart 4 depicts
the breakup of the Indian innerwear market.
Men’s inner wear industry: The economy and the mid-premium segments in the
men’s innerwear industry are highly fragmented, with 10 brands having a
nationwide presence. The competition is much higher at the regional level with
over 20 competing brands; this lowers margins of domestic players. In contrast,
the premium and the super-premium segments, where Jockey is present, are fairly
concentrated with only 3-4 players (see table 11).
Table 12. Men’s innerwear industry players
Amul 9
Body Care 9
Chromozome 9 9
Crocodile 9
Dollar 9
Euro 9 9
Gen X 9
Hanes 9 9
Jockey 9 9 9
Peter England 9
Rupa 9
Triumph 9 9
Van Heusen 9
VIP 9 9
Source: I IMAGES Business of fashion, August 2005
Branded Apparels
Page Industries
Growth: Between 2003 and 2005, the men’s innerwear industry grew by 5% in
volume terms; the value growth was more significant at around 13%. While the
growth in the economy segment during the same period was moderate at 2-
4%, the premium and the super-premium segments grew by 15% each (see
chart 5). The value growth between 2003 and 2005 has been substantially
higher, with the premium and the super-premium segments growing by 28%
and 40% respectively (see chart 6). We believe that Page Industries’ increased
focus would enable it to capture a large share of this growth.
Chart 4. Men’s innerwear industry growth trend

( % growth)
14
12
10
0
2003 2004 2005
Volume Growth Value Growth
Source: Images, Business of Fashions, Aug-05
Chart 5. Men's Innerwear industry: Segment wise growth

( % g r o w t h)
45
40
35
30
25
20
15
10
5
0
Super Premium Mid- Low Very low
Premium Premium
Volume growth Value growth
Branded Apparels
Page Industries
The following are the growth drivers in the men’s innerwear market:
The entire organized men’s innerwear segment is expected to grow
significantly; the economy and the mid-premium segment, however, are
expected to show a moderate growth at 4-5%. The demand in this segment
would be driven by the shift of consumers from unbranded to branded
products.
In the premium and the super-premium segments, the demand growth would
be driven by consumers who are upgrading their preference towards products
with a higher feel and comfort; this is a key selling point of products in the
higher price segment. Higher disposable incomes and the growth in organized
retailing in India would instigate consumers to explore such products, leading
to this shift. Hence, we expect a 10-15% growth in these segments, led by
higher volumes and price realizations.
Women’s inner wear industry: The women’s innerwear industry in India is marked
by higher competition than the men’s segment. The women’s innerwear segment
comprises 10 players in the economy segment and 5-6 players in the premium and
the super-premium segments (see table 12). However, the penetration of the
branded players in this segment is poor, constituting only 10% of the overall
market.
Table 13. Women's innerwear industry - Key players
Amul 9
Bodysecrets 9 9
Bodycare 9 9
Dollar 9
Dreams 9
Enamor 9 9
Euro 9
GenX 9
Hanes 9 9
Jockey 9 9
Lasenza Lingerie 9 9
Little Lacy 9 9
Lovable 9 9 9
Splash 9
Triumph 9 9
VIP 9
Source: I IMAGES Business of fashion, August 2005
Growth: The growth in the women’s innerwear segment has been the highest
in the Indian innerwear industry. The economy segment grew by 10-15% in
2005, mainly on account of higher value growth as consumers shifted to the
Branded Apparels
Page Industries
branded segment. The growth in the premium and the super premium
segments has been much stronger at around 32-45%, albeit on a small base.
The growth drivers in the women’s innerwear market, going forward, would be:
The growth in the economy segment would be led by a shift in consumer
preference from unbranded to branded products. This growth is likely to be
more volume-led, driven by the growth in organized retailing in India.
The growth in the premium and the super premium segments would be led by
consumers with higher disposable incomes striving for better comfort and fit.
In an effort of making more informed purchases, the consumers in these
segments would move up the value chain. Hence, the growth in these
segments would be led by higher volumes and better price realizations.
Chart 6. Women's Innerwear industry: growth trend
(% growth)
21
18
15
12
0
2003 2004 2005
Volume Growth Value Growth
Chart 7. Women's Innerwear industry: Segment wise growth
(% growth)
48
42
36
30
24
18
12
6
0
Super Premium Mid- Low Very low
Premium Premium
Volume growth Value growth
Branded Apparels
Page Industries
Financial analysis
Enviable financials, high capital efficiencies

Page Industries has reported fast growth in turnover and profits during the last
three years. In FY07, the company has also reported unmatched return ratios; ROCE
and ROE stood at 91% and 42% respectively. Factors such as efficient and
competitive manufacturing operations and premium pricing have enabled the
company to report one of the highest operating margins in the innerwear industry.
Table 13 outlines a comparison of the three players in the innerwear industry,
clearly indicating the company’s superior margins.
Table 14. Innerwear industry: Comparison of financial position
Page Maxwell
(Rs.mn) Industries Industries Rupa & Co
Sales 1,368.56 1959.4 2324.7
CAGR (last 5 years) 28.1 -0.1 11.4
Operating Margins 20.5 11.3 5

PAT Margins 12.4 4.3 1.8
RoCE 90.6 19.5 10

RoE 42.4 20.7 18.6
Source: Annual Reports, IIL research
Note: Page reports sales figures at net realizable prices and not at MRP
Changing revenue mix, backward integration and increasing scale to increase

margins
The operating margin of Page Industries is expected to expand by around 150bps
due to:
Change in revenue mix: Page Industries caters to 3 segments of the
innerwear market – mid-premium, premium and super-premium. The
premium and super-premium segment (where the margins are
significantly higher) is set to witness a much faster growth as compared to
the mid-premium segment, being an evolving segment and new product
introductions by Page in this segment. Hence, with this shift in revenue
mix, Page’s operating margins are set to increase marginally.
Backward integration into manufacture of elastics: Page Industries
believes that the high quality standard it has maintained over the years is
one of the company’s key growth drivers. The availability of good quality
elastics has been a concern for the company. To overcome this, Page
Industries is in the process of backward integrating into the
manufacturing of woven elastics, thereby saving 20% in production costs.
Higher scale of operations
Branded Apparels
Page Industries
A strong 50% growth in net profits estimated over the next 2 years
Over the next three years, Page Industries is likely to report a growth of 35% CAGR
in revenues and 50% in net profits; the growth will be driven by the aggressive
steps by the management to garner a higher market share in the premium
innerwear industry.
The increased thrust in promoting the women’s innerwear products would lead to a
much stronger growth for Page Industries in this segment. Hence, the contribution
of this segment to the overall revenues is expected to increase by FY09. The strong
revenue growth and the improvement in margins are expected to boost the growth
in net profits over the next three years.
Table 15. Page Industries - Estimated revenue breakup and Growth
(% share) FY07E FY08E FY09E CAGR (%)
Men's Innerwear 72 71 70 32.8
Women's Innerwear 14 15 17 49.5
Leisurewear and others 14 14 13 28.3
Source: IISL research
Branded Apparels
Page Industries
Financials
Profit & Loss Balance Sheet
Rs mn FY06 FY07 FY08E FY09E Rs mn FY06 FY07 FY08E FY09E
Net sales 1,017.8 1,368.6 1,904.6 2,533.9 Equity capital 24.4 111.5 111.5 111.5
YoY (%) 39.4 34.5 39.2 33.0 Preference capital 0.0 0.0 0.0 0.0
Total expenses 823.8 1,087.8 1,477.9 1,964.1 Reserves 100.9 565.7 784.4 1,094.3
Inc/dec in stock (1.3) (97.1) (29.9) (29.9) Net worth 125.2 677.2 895.9 1,205.8
Raw material cost 369.7 571.3 718.8 938.4
Staff cost 127.7 204.0 251.8 330.0 Total borrowings 131.9 253.2 243.1 181.3
Power and fuel cost 7.2 9.7 13.4 17.8 Deferred tax 11.7 8.3 9.8 8.2
Other manufacturing exp. 156.6 217.0 239.8 319.2 Total liabilities 268.9 938.8 1,148.8 1,395.3
Other expenses 164.0 182.9 284.0 388.5
EBIDTA 194.0 280.7 426.7 569.9 Gross block 166.3 245.7 406.3 566.3
YoY (%) 141.9 44.7 52.0 33.6 Less: Acc. depreciation 43.5 58.1 88.8 125.6
EBIDTA (%) 19.1 20.5 22.4 22.5 Net block 122.7 187.6 317.5 440.7
Other income 3.9 18.1 32.7 27.5 CWIP 0.0 60.8 20.0 0.0
PBIDT 197.9 298.9 459.4 597.4
Interest 15.8 23.6 23.5 18.6 Investments 7.0 137.0 388.8 324.0
Gross profit 182.1 275.2 435.9 578.8 Current assets 324.1 825.0 615.7 808.3
Depreciation 8.4 15.3 26.5 36.8 Inventories 233.9 363.7 439.0 558.8
PBT and extra ordinary 173.7 259.9 409.4 541.9 Debtors 59.0 55.8 110.4 146.8
Extra ordinary items (0.3) (0.8) 0.0 0.0 Cash 0.3 301.9 10.0 10.0
PBT 173.4 259.0 409.4 541.9 Loans and advances 30.9 103.6 56.4 92.7
(-) Tax 59.5 88.8 127.7 169.1 Current liabilities 154.5 243.9 153.1 180.3
Tax/ PBT 34.3 34.3 31.2 31.2 Provisions 30.5 27.7 93.4 93.4
PAT 113.9 170.3 281.6 372.8 Net current assets 139.1 553.4 369.2 534.6
Adjusted net profit 113.9 170.3 281.6 372.8 Miscellaneous expenses 0.0 0.0 53.3 96.0
YoY (%) 169.0 49.5 65.4 32.4 Total assets 268.9 938.8 1,148.8 1,395.3
Key Ratios Cash Flow

FY06 FY07 FY08E FY09E Rs mn FY06 FY07 FY08E FY09E
EPS (Rs) 467.7 15.3 25.2 33.4 Net profit 113.9 170.3 281.6 372.8
Adjusted EPS (Rs) 0.0 0.0 0.0 0.0 Depn and w/o 8.4 15.3 26.5 47.5
CEPS (Rs) 500.0 17.2 27.5 36.6 Deferred tax (0.5) 5.9 (1.2) (1.6)
Book value (Rs) 514.1 60.7 80.3 108.1 Change in working cap (25.1) (112.6) (107.7) (165.4)
Dividend per share (Rs) 227.6 5.0 5.6 5.6 Other income 0.0 0.0 0.0 0.0
Debt-equity (x) 1.1 0.4 0.3 0.2 Operating cash flow 96.7 78.8 199.2 253.3
ROCE 81.5 90.6 38.7 42.2
ROE 118.7 42.4 35.8 35.5 Other income 0.0 0.0 0.0 0.0
Capex (37.6) (141.0) (115.6) (140.0)
Valuations Investments (4.0) (130.0) (251.8) 64.8
Investing cash flow (41.6) (271.0) (367.4) (75.2)
PE (x) 0.9 28.5 17.2 13.0
Cash PE (x) 0.9 25.3 15.8 11.9 Dividend (55.4) (55.5) (62.9) (62.9)
Fresh equity 0.0 350.1 (0.0) (0.0)
Price/book value (x) 0.8 7.2 5.4 4.0 Debt 0.2 121.3 (10.1) (61.9)
Dividend yield 52.3 1.1 1.3 1.3 Financing cash flow (55.2) 415.9 (73.0) (124.8)
Market cap/sales 1.0 3.5 2.5 1.9 Others 0.0 77.9 (50.7) (53.3)
EV/sales (x) 1.2 3.5 2.7 2.0 Net change in cash (0.1) 301.6 (291.9) 0.0
EV/EBDITA (x) 6.1 17.1 11.9 8.8 Opening cash 0.4 0.3 301.9 10.0
Closing cash 0.3 301.9 10.0 10.0
Notes:
Page Industries issued bonus shares of in the ratio 3:1 in FY07
The face value of the shares has been changed to Rs10 from Rs100 in FY07
Branded Apparels
Page Industries
Name of the Analyst Email Tel. No.
Research
Sreesankar R Head of Research/ Strategy/ Shipping/ Retail/ Economy sreesankar@investsmartindia.com 67069914
Ashish Aggarwal IT ashish.aggarwal@investsmartindia.com 67069925
Jayesh Sundar Textiles/ Chemicals/ Paper/ Fertilizers/ Power jayesh.sundar@investsmartindia.com 67069944
Milind Bhangale Pharma milind.bhangale@investsmartindia.com 67069907
Vishal Mishra Metals/ Cement vishal.mishra@investsmartindia.com 67069943
Sameer Deshmukh FMCG sameer.deshmukh@investsmartindia.com 67069946
Mahesh Bendre Capital Goods/ Power mahesh.bendre@investsmartindia.com 67069917
Dipesh Sohani Automobiles & Auto components dipesh.sohani@investsmartindia.com 67069933
Devang Patel Infrastructure/ Real Estate devang.patel@investsmartindia.com 67069927
Sidharth Agrawal Sugar/ Hotels/ Logistics sidharth.agrawal@investsmartindia.com 67069940
Mukesh Kumar Midcap mukesh.kumar@investsmartindia.com 67069926
Vishal Shah Banking vishal.shah@investsmartindia.com 67069918
Sreejith Narayanan Economist sreejith.narayanan@investsmartindia.com 67069922
Rachna Kumari Media rachna.k@investsmartindia.com 67069941
Anukool Modak Research Associate anukool.modak@investsmartindia.com 67069915
Sanket Dalvi Research Associate sanket.dalvi@investsmartindia.com 67069900
Naveen Baid Research Associate naveen.baid@investsmartindia.com 67069940
Akhil Jain Research Associate akhil.jain@investsmartindia.com 67069932
Gurpreet Singh Arora Research Associate gurpreet.arora@investsmartindia.com 67069973
Ankita Bajpai Editor ankita.bajpai@investsmartindia.com 67069915
Charudatt Vartak Production charudatt.vartak@investsmartindia.com 67069923
Sales
Amola Jhaveri amola.jhaveri@investsmartindia.com 67069912
Dharmen Shah shah.dharmen@investsmartindia.com 67069919
Jayant Pai jayant.pai@investsmartindia.com 67069906
Mrinal Tiwari mrinal.tiwari@investsmartindia.com 67069962
Geetha Nair Sales support geetha.nair@investsmartindia.com 67069947
Dealing
Anish Marfatia anish.marfatia@investsmartindia.com 67069909
Anmol S. Shanbhag anmol.shanbhag@investsmartindia.com 67069903
Firdaus Ragina firdaus.ragina@investsmartindia.com 67069905
Khozem Jabalpurwala khozem.jabalpurwala@investsmartindia.com 67069902
Mohan Joshi mohan.joshi@investsmartindia.com 67069910
Nipul Kenia nipul.kenia@investsmartindia.com 67069911
Derivatives
Abhijit Dalal abhijit.dalal@investsmartindia.com 67069923
Manish Raval manish.raval@investsmartindia.com 67069960
Parag Joshi parag.joshi@investsmartindia.com 67069965
Viral Bhagat viral.bhagat@investsmartindia.com 67069961
Branded Apparels
Page Industries
IISL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial
instruments dealt in the report or may make sale or purchase or other deals in the securities from time to time or may deal in other securities of
the companies/ organizations described in this report
Certification of Research Analyst

I, Jayesh Sundar ,hereby certify that: the views expressed in the attached research report accurately reflect my personal views about Page
Industries and its securities, and my compensation is not directly or indirectly, related to the specific views or recommendations expressed in
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Branded Apparels
Page Industries
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Branded Apparels

Jayesh Sundar Ride with the Jockey

Valuations: Despite, Page’s superior business model,

Table 1. Product portfolio

Table 2. Sales breakup and growth trend

Focused in premium segment

Table 4. Men’s innerwear industry - Key players

Aggressive foray into women’s innerwear segment

Avg Industry M.R.P 549 251 143 60

Strong distribution and marketing set-up

Table 7. Page Industries: Region wise distribution strength

Unique positioning in Multi-branded outlets(MBO) and hosiery stores creates

Integrated business model; yet asset-light

Chart 1. Page Industries' process flow

Yarn Knitting Processing Garmenting QC and packaging

Procured by Page's Fabric Fabric processing Garmenting done in Conducted in Page's

Brand building - an increased thrust

Never Always Ocassionally

Women innerwear - a huge growth segment

Table 9. Page Industries: Future growth strategy

Aggressive pipeline of new product introductions

Men's super premium range- International collection Launched in Q1FY07

Fashion forward - Coloured range of lingerie Q3FY07

Jockey, USA provides a tower of support

Table 11. Page Industries - Comparative Valuations

Women's wear Men's wear

Organised Unorganised Organised Unorganised

Chart 4. Men’s innerwear industry growth trend

Chart 5. Men's Innerwear industry: Segment wise growth

Chart 7. Women's Innerwear industry: Segment wise growth

Enviable financials, high capital efficiencies

Operating Margins 20.5 11.3 5

RoCE 90.6 19.5 10

Changing revenue mix, backward integration and increasing scale to increase

Key Ratios Cash Flow

Certification of Research Analyst

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