Religare Sec has initiated coverage on India's growth sector - Innerwear - catered by Page Industries for Men and Lovable Lingerie for Women.
The Indian innerwear industry posted a turnover of ~Rs 160bn as of FY12. While the men’s segment accounted for 35% (~Rs 55bn) of the market, the women’s segment contributed the rest. We expect the innerwear industry to grow at ~13% CAGR for the next three years, with women’s segment CAGR at 14% and men’s at 10%. The branded innerwear market in India is under-serviced and has been growing faster than the overall clothing market, driven by rising disposable incomes, urbanisation and increasing penetration of modern retail.
Loveable Lingerie
The company offers higher medium-term growth prospects due to the lower organised share in the women’s innerwear segment – the company’s stronghold. Further, we see potential stock triggers in the form of improving ROEs, free cash generation and new international tie-ups. Despite valuing LLL at a 10% discount to PAG, we arrive at a TP of Rs 425, 25% upside from current levels.
Page Industries
The Company is fundamentally has very strong brand and distribution network, industry leading growth and RoE. However, we initiate with a HOLD due to full valuations and we expect the stock to trade sideways over the next 6-9 months. We advise medium term
investors to accumulate during this time period.
