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Friday, June 15, 2012

Mid Cap Stock To Buy - Page industries

Here is one Mid cap stock to buy with huge growth potential still waiting ahead.

Page Industries is a franchisee of Jockey International (USA) in India. It manufactures and distributes Jockey products in India, Sri Lanka, Bangladesh, Nepal and UAE. Its products include innerwear and leisure wear for men and women. Though men's innerwear is the major contributor to total sales, the contribution of women's innerwear and that of other categories has been rising steadily. It has an installed capacity of almost 10.9 crore pieces per annum. The company has very strong distribution channel and you can see the Jockey products selling in every clothing shop across the nation.

GROWTH
The company is in business for more than 17 years now and has established itself in India with very strong distribution network of 400 distributors and 20,000 retail outlets. It is a very wellknown brand with superb brand power that gives it product pricing power to keep it's profit margins stable.

The innerwear market has been growing at compounded annual growth rate of 12% for last ten years. Sales of Page industries have grown at a CAGR of 34% for past 10 years. Company has increased it's manufacturing capacity by 500% in past 10 years. With added capacity in future, company will explore markets of Sri Lanka, Bangladesh, Nepal and UAE.

STOCK FINANCIALS
Sales of Page Industries have grown at a CAGR of 38% in the past five years. Net sales is expected to be Rs.700 crore in FY12. Operating margins are 21% for past five years. Its PAT has grown at a CAGR of 40% and is expected to be Rs.93 crore for FY12. It's debt- equity ratio was 0.4 as on September 30, 2011. The debt was for faster capacity expansion.

STOCK VALUATIONS
Return on Equity for Page Industries has been very high (43 in FY10, 53 in FY11 and is expected at 65 in FY12). Very few stocks can generate such a high and a growing return on equity. The stock trades at stock price of Rs.2,900 currently. This puts P/E ratio at 36. The steep valuations seem to be very high at this point of time. It is the price of being very high growth stock. This high growth potential certinaly makes it a stock to buy. If this stock corrects with valuations of below 30 P/E, one may buy stocks of Page Industries for long term investment.

2 comments:

  1. Current price is even far more above that of SBI/BHEL. Can you compare the stock with these Blue Chips?????

    ReplyDelete
  2. Go with Rupa than this stock or if looking other sector buy Escorts. Mahindra looking to take over this co. a diversified conglomerate

    ReplyDelete

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