Page Industries falls short in Q1; puts growth recovery in question2 min read . Updated: 06 Sep 2020, 09:49 PM IST
- Investors are worried that its problems go beyond covid, given the sluggish growth
- Liquidity worries, demand slowdown, and competition are factors that affected results in past 2 years
MUMBAI : Till about two years ago, the Page Industries Ltd stock was highly sought after. The shares had risen about 80 times between August 2008 and August 2018. However, since its peak two years ago, the stock has almost halved. The company’s revenues and profits were hit in the June quarter because of the covid-19 pandemic, but investors are more worried about the long-term growth potential.
“There is no indication that the company, which has reported flattish earnings per share over the past two years, has turned the corner on the path to topline and earnings growth," analysts from Motilal Oswal Financial Services Ltd said in a note on Page’s Q1 earnings. The company’s shares have fallen by 6% since it announced weak results for the June quarter. The company reported an Ebitda (earnings before interest, tax, depreciation and amortization) loss of almost ₹35 crore last quarter.
Page did say in its post results earnings call that August sales are close to year-ago levels. However, not everyone is holding their breath. “Page reported a disappointing 1QFY21 earnings print with the revenue print not doing any justice to the super-bullish qualitative commentary offered by the management in the 4QFY20 earnings call," Kotak Institutional Equities said in a report on 4 September.
Investors are worried that the company’s problems go beyond covid, given the sluggishness in growth in the past two years. “In the past two years, (Page’s) growth has been far more modest, with sales/Ebitda growing ~7%/-1%. The advent of competition in premium innerwear, overall slowdown in demand, and liquidity concerns in the trade are key factors affecting performance," Motilal Oswal’s analysts pointed out.
In Q1, revenues declined by as much as 66% year-on-year (y-o-y) to about ₹285 crore, coming in lower than street estimates. Reflecting the full impact of the covid-19 lockdown, sales volumes dropped by a massive 69%. Even so, average selling price (ASP) improved because of the better performance of the athleisure segment. In keeping with the pandemic times, Page said it saw substantial growth in e-commerce.
However, better ASPs and higher e-commerce growth didn’t move the needle materially. The bigger disappointment was the contraction of nearly 700 basis points in gross profit margin to 48.1%. Despite the bleak backdrop, Page shares still enjoy pricey valuations of about 46 times estimated financial year 2022 earnings.
The uncertainty on the pace of recovery remains high. “Although Page seems to be better placed due to work-from-home led demand for its athleisure products, given the significant deceleration in growth over FY19-20, we await more clarity on recovery trends," said Emkay Global Financial Services Ltd’s analysts in a 3 September report.