After reading about and following the stupendous trajectory of Page Industries and Lovable Lingerie, what jogged my memory was a company called Maxwell Ind. (makers of VIP inner-wear and related accessories). Considering how its peers have left it far behind (in spite of its head start) and the steps it has taken to change the situation, it may be worthwhile to track it and see how it develops.
The point to be noted is that their earnings are pretty low at this point (0.32 on TTM basis giving a PE of around 73 at the current price of 23.50 as of Feb 20 '12), but this could change going forward for following reasons:
1. They have recently sold their spinning business and going by management’s publicly stated intention, they plan to focus on brands. If this really happens, this could boost their earnings and margins significantly and it may go the Lovable or Page way, both enjoy premium valuations > 20 (Page @34 and Lovable about 28).
2. They have got a lot of brands already though I suspect that they haven’t been able to market them well, maybe because of the overhang of their spinning business or sheer incapability.
VIP is one of the major brands which is almost 40 years old, Frenchie for the youth, Feelings for the ladies, and soon to be launched brand for kids called Brat. Last year, they launched a French lingerie brand called Eminence (though not much was heard of it – another marketing failure perhaps). Besides this, they also plan to tie up with another international brand soon.
3. They plan to launch retail stores for their brands in Tier 2/3 cities by next year or so. This would be a good strategy for keeping the costs in check and testing the waters before the big bang in metros.
4. They plan to diversify into other accessories such as lounge-wear (like Page has done with Jockey) and sportswear.
The point to be noted is that their earnings are pretty low at this point (0.32 on TTM basis giving a PE of around 73 at the current price of 23.50 as of Feb 20 '12), but this could change going forward for following reasons:
1. They have recently sold their spinning business and going by management’s publicly stated intention, they plan to focus on brands. If this really happens, this could boost their earnings and margins significantly and it may go the Lovable or Page way, both enjoy premium valuations > 20 (Page @34 and Lovable about 28).
2. They have got a lot of brands already though I suspect that they haven’t been able to market them well, maybe because of the overhang of their spinning business or sheer incapability.
VIP is one of the major brands which is almost 40 years old, Frenchie for the youth, Feelings for the ladies, and soon to be launched brand for kids called Brat. Last year, they launched a French lingerie brand called Eminence (though not much was heard of it – another marketing failure perhaps). Besides this, they also plan to tie up with another international brand soon.
3. They plan to launch retail stores for their brands in Tier 2/3 cities by next year or so. This would be a good strategy for keeping the costs in check and testing the waters before the big bang in metros.
4. They plan to diversify into other accessories such as lounge-wear (like Page has done with Jockey) and sportswear.
So if all things go according to the above script, this may yet start bouncing the way Bata did after hibernating for a few years about 3 years ago. Again nothing can be expected in the near future as they have a lot of clean-up to do and the business environment is not exactly healthy.
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