Among the elite, affluent and aspiring category of customers, PAGE’s men’s innerwear products account for only 18.5% of the potential market, while its women’s innerwear products command an even lesser share of 6-7 %. Athleisure (referred by the company as its sports and leisurewear products) has 6% share, while socks too has about similar share of the potential market. This indicates that that the opportunity for growth is immense even without getting into the mass market. There is also potential for cross-selling – Jockey men’s innerwear customer base can be leveraged to grow the athleisure and socks (6% share each) segments. The company plans to ramp-up its production capacity at a CAGR of 17% over the next three years. A strong focus on Exclusive Brand Outlets (EBOs) and Jockey Comfort Zones are the key drivers of incremental sales growth.
Strong brand equity of ‘Jockey’, a wide and increasing distribution reach, commendable design ability and a robust manufacturing setup are its key advantages.
There is no change to our forecasts. We maintain ‘buy’ with a revised target price of Rs 19,125 (target multiple maintained at 45x June 2019E EPS, at a 15% discount to three-year average P/E). Unlike retail peers, PAGE has exhibited the ability to maintain strong double-digit volumes growth and high RoEs, justifying high valuations.
We believe PAGE is a compelling, capital-efficient, long-term lifestyle play on the premiumizing innerwear category. A widening product and brand portfolio, coupled with distribution expansion, will aid its market share and drive multiple years of growth, in our view.
Jockey is the pioneer in establishing the premium segment innerwear category in India. Its focus remains on the category above the mass level (i.e., elite, affluent and aspiring customers). However, the brand’s market share in this target segment remains small, despite exhibiting rapid growth after its entry in the country.