Page Industries’ stock price breached Rs 32,000 levels in August 2018, rebuffing analyst estimates and impressing investors with its rise. Over the next three years, its double-digit growth rate slowed as it navigated a macroeconomic slowdown, high competitive intensity, and the Covid-19 pandemic. But with a best ever Q3FY21 followed by a robust March 2021 quarter, the stock is back to its 2018 levels. The company plans aggressive network expansion, doubling capacity and penetrating the rural hinterland to fuel future growth.

Quick Takes:

• Page Industries aims to double its capacity from its existing 260 million pieces in next 4-5 years

• Capital expenditure (capex) of Rs 300 crore is outlined for capacity expansion in FY22

• The company expects to maintain a 21% EBITDA margin on an average for FY22

• The company’s key manufacturing facilities were shut for a month in Q1FY22 

• Average price hike across the product portfolio in FY22 will be between 4-5% mainly due to rising raw material prices 

Page Industries faces increased competition from Indian brands

Page Industries is the exclusive licensee of Jockey International Inc (USA) in India. It manufactures and distributes men’s innerwear, women’s innerwear, children’s innerwear  and athleisure wear for both men and women. Among all the fashion categories, innerwear is one of the fastest growing over the last few decades. 

The domestic innerwear market is worth around Rs 30,000 crore. Transforming from need based to aspiration based, domestic innerwear demand is spurred by changing consumer buying behaviour and increased fashion consciousness among millennials. Page Industries entered the domestic innerwear market in 1995, and in the next two years started catering to both men and women categories.

This space was highly fragmented with roughly 80% of the innerwear market dominated by unorganized players. The landscape started changing in the early 2000s as higher disposable income levels and urbanization altered customer tastes and preferences. 

Page Industries captured this underlying demand and catered to premium and mid-premium segments. Revenue and profit after tax (PAT) for the company moved at a compound annual growth rate (CAGR) of 30% from 2008-18. But as MNCs and Indian players crowded the domestic innerwear market, Page Industries’ phenomenal growth slowed. Economic slowdown also played its part and the company’s  stock price fell to Rs 18,000 by August 2019.

Page Industries outperforms peers in March 2021 quarter

The management had guided for a strong recovery by the end of FY21. And true to its word, after reporting its best performance in Q3FY21, the March 2021 quarter brought in robust numbers. Volume growth of 54% YoY and net profit nearly quadrupled in Q4FY21 to Rs 115 crore. Revenues rose 63% YoY to Rs 880 crore. Operating margins expanded more than eight percentage points at 19.3% in Q4FY21. The company made a smart recovery after a lack-lustre H1FY21, especially after revenue and volume decline of 66% YoY and 69% YoY, respectively, in Q1FY21.

The company’s listed peers like Lux Industries and Dollar Industries have also reported a strong recovery. But Page Industries’ net profit growth outperformed its peers in March 2021.

In addition to its high quality product mix and strong brand recall, the company’s strong distribution network stood it in good stead. Page Industries’ distribution network comprises more than 78,000 multi-retail outlets (MBOs), 930 exclusive brand outlets (EBOs) and more than 3,900 distributors across 2,890 cities in India. Dollar Industries’ reach is limited to 11,000 retailers. Although Lux Industries has a presence in more than 2,00,000 MBOs, it has only 11 EBOs. According to Page Industries’ management, a strong EBO network with its strong visibility and various company driven promotional activities such as WhatsApp service based delivery aided higher volume growth and profitability for the company.

Augmenting distribution reach to spur future growth

Revenues from men’s innerwear slowed down for the company over the past 2-3 years. It is the largest revenue contributor with roughly 40-45% of total revenues, but the men’s innerwear segment is facing heavy competition not only from close peers like Lux Industries, Dollar Industries, Calvin Klein, and Marks and Spencer but also from new entrants like Aditya Birla Fashion Retail (ABFRL) with its Van Heusen brand. ABFRL is making strong inroads with affordable price points and a wide distribution network. 

Vedji Ticku, CEO of Page Industries said, “The only way to augment that side of the business (men’s innerwear) is distribution. There's no other way.” The company added around 14,600 multi-brand outlets (MBO) stores and opened 200 new exclusive brand outlets (EBOs) in FY21. Due to the Covid-19 pandemic induced disruption, the company put on hold new launches in the men's range. New launches and a wider distribution network is the way forward for growth in the men’s innerwear business, according to the management. Page Industries is also enhancing its EBO strength to 1,000 stores from the present 930 in the next 6-8 months. This is next only to Bata India.

The men’s innerwear market is currently valued at Rs 11,000 crore and is expected to grow at a CAGR of 7% over the next decade. While men’s innerwear constitutes nearly one-third of the total inner wear market, women’s innerwear share is more than 60%. Women’s innerwear valued at around Rs 21,000 crore is expected to grow at a CAGR of 12.5% over the next decade. 

The company is catering to only 6-8% of the women's market and around 20% in the men's innerwear space. The management says that the significant size of this market means the company needs to figure out how to reach new customers by expanding distribution.  

Athleisure and Junior Jockey are new growth drivers

Athleisure wear, the most dynamic and fast-growing segment in the Indian apparel market, is a combination of both fashion and functionality. For Page Industries, while men’s and women’s innerwear saw flattish volume growth in FY21, athleisure continues to grow in high double digits. Athleisure wear was the major growth driver in FY21 with average selling price (ASP) nearly 2-3 times higher than innerwear. According to the company’s Q4FY21 investor presentation, the athleisure market size in India is about Rs 54,000 crore, growing at 18-20%. The management noted that the athleisure segment is now the largest contributor after men’s wear for Page Industries. 

Children’s innerwear is a special focus area for the company. This business (nearly 4% revenue contribution) grew by almost 75-80% YoY in FY21. According to the company’s Q4FY21 investor presentation, the children's wear market in India is estimated at around Rs 81,900 crore, and is expected to grow at a CAGR of 8.5% in the next five years. The company has 38 EBOs exclusively for Jockey Junior business and intends to double its reach by the end of FY22. 

And lastly a rural strategy has been formulated to diversify the company’s revenue base, which is currently dependent on metros and tier I & II cities, which constitute 60% of total revenues. The company has selected its 36 best-selling products at lower prices to increase its rural revenue base. Page Industries aims to achieve a revenue target of $ 1 billion in the next 4-5 years. Page Industries stock price made a new 52-week high recently. Sustaining momentum will depend on the success of its expanded distribution and capex plans.