Reduce Page Industries; target of Rs 3165: Dolat Capital

Dolat Capital is bearish on Page Industries and has recommended reduce rating on the stock with a target of Rs 3165 in its May 30, 2012 research report.

“Page Industries, “net sales at Rs 1.5bn, up 38.5% YoY, was inline with our estimate (Dolat est. – Rs 1.5bn). Gross margin declined by 350bps YoY mainly due to continued promotional offer. EBITDA margin expanded by 29bps YoY to 15.7% on lower other expenditure down 210bps YoY. EBITDA at Rs 242mn was up 41% YoY (Dolat est. – Rs 268mn). PAT at Rs 170mn up 32% was inline with our estimate. For FY12, Net sales grew by 39% YoY to Rs 6.8bn.”

“EBITDA at Rs 1.3bn was up 46.6%. PBT at Rs 1.34bn up 52.7%. PAT at Rs 900mn was up 53.7%. Volume growth stood at 18.9% and realization increased by 16.8%. Volume growth for the quarter stood at 24.9%. Volume growth in Men segment grew by 22.9%, Women segment grew by 34.3% while Leisure wear growth stood at 19.7%. Women wear reported highest growth at 52%. Volume from Speedo stood at 70k pieces with an average realization of Rs 385. Management indicated significant increase in processing charges, elastic and packaging cost and negated the benefit of lower cotton yarn price. Currently, yarn prices have increased to Rs 210/kg as against Rs 200/kg in Q3FY12.”

“We believe Page Industries strong distribution reach and Jockey brand provides company a strong platform to introduce new products. We maintain our earning estimate and expect the company to post a CAGR of 25% during FY12-14E. At CMP, the stock trades at 31x FY13E EPS of Rs 102 and 25x FY14E EPS of Rs 126.6. While we remain positive on the structural story, given the rich valuation we downgrade our recommendation from Accumulate to Reduce,” says Dolat Capital research report.

FIIs holding more than 30% in Indian cos

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