Among the elite, affluent and aspirers 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.
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 is the key driver 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.
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 premiumising innerwear category. A widening product and brand portfolio, coupled with distribution expansion, will aid its market share and drive multiple years of growth. Macro factors driving growth for the company are: higher disposable income, strong brand affinity in the buying group, ages between 15 and 34, urbanisation and strong appeal for Jockey. Strong design ability at local level and design expertise are the key advantages.
Barring the US and parts of western Europe, Jockey operates via a master franchisee route in other markets. The company has a team of 43 people designing premium products and focusing on new categories. PAGE’s extensive manufacturing facility with 17 factories and 20,000 employees is another key advantage. Hand stitching also brings in the skill factor into play.