>PAGE INDUSTRIES LIMITED (DOLAT CAPITAL)

Page Industries Ltd. (PIL) Q4FY09 results were in line with our expectations. Better realization and higher volumes resulted into a growth of 25.4% in net sales (YoY). Lower material cost helped in improvement of operating margins by 180bps. However, higher depreciation and employee cost (due to increased capacities) negated this to a certain extent. With increased capacities, strong brand image and pan India presence, we feel the company is well poised to capture the growth in volumes and value. We reiterate our BUY recommendation on the stock with a revised price target of Rs.612 (12x FY11E) in the next 12~18 months.

Q4FY09 result analysis:

■ PIL sold 8.35mn pcs in Q4FY09 (39mn pcs in FY09) vs 6.8mn pcs in Q4FY08 (31mn pcs in FY08). The average realization in Q4FY09 has improved to Rs.67.5 per pc (Rs.65.3 per pc in FY09) from Rs.66.2 per pc. (Rs.62.1 per pc in FY08).

■ The operating margins improved by 180bps to 17.2% mainly on account of lower raw material prices which declined by 220bps (as a % of sales).

■ PAT grew by 27.7% to Rs.55.6mn vs Rs43.5mn in the last corresponding quarter. PAT margins were under pressure mainly due to higher depreciation. We expect margins to improve as no more incremental capex is required.

■ The current capacities of the company stand at 74mn pcs p.a. up from 54 pcs p.a. These capacities would be enough to take care of demand for at least next two years.

■ The working capital turn over ratio (on an annual basis) improved from 4.5 in FY08 to 5.3 in FY09.

■ PIL had paid a dividend of Rs.17 per share for the year FY09 and had also declared interim dividend of Rs.9 per share for FY10.

■ Total no. of EBOs (Exclusive brand outlets) currently stands at 46 stores which PIL plans to augment to 100 stores in the next two years.

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