Muted demand outlook dampens Page’s turnaround hopes | Mint

Muted demand outlook dampens Page’s turnaround hopes

Page holds the exclusive licence for the manufacture, marketing and distribution of Jockey brand in India and some more countries.
Page holds the exclusive licence for the manufacture, marketing and distribution of Jockey brand in India and some more countries.

Summary

  • Falling volumes led to 8.4% year-on-year drop in revenue to 1,125 crore in the September quarter.

The woes of Page Industries Ltd are far from over with revenue declining year-on-year for the third consecutive quarter. Falling volumes led to 8.4% year-on-year drop in revenue to 1,125 crore in the September quarter (Q2FY24). Page holds the exclusive licence for the manufacture, marketing and distribution of Jockey brand in India and some more countries. It also holds the sole licence for Speedo brand in India. Volumes were impacted by muted demand, which led to excess inventory in the system. A high base also played spoilsport to some extent. Thus, the company missed analysts’ expectations on revenue in Q2.

 

(Graphics: Mint)
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(Graphics: Mint)

What’s more, the demand environment is not likely to pick up pace any time soon. Page sees some stress in the urban and mid-premium segments. In men’s innerwear, it notes that consumers have not downgraded but the buying quantity has reduced. So the company hopes that sales will get a boost from the festival season in Q3. However, according to Nuvama Research, it is not certain how salient the innerwear category is to a spike during festival season. This means that festive season may or may not be a catalyst for Page to revive volumes. There is some respite on the margin front. Despite the fall in revenue, Page clocked about 140 basis points year-on-year expansion in the Ebitda margin to 20.8%. This was led by stable raw material costs and a fall in employee expenses and advertisement costs. Page plans to maintain Ebitda margin in the 19-21% range going ahead. Since the company is investing in some digital initiatives, some adverse impact on the margin cannot be ruled out. Ebitda is earnings before interest, taxes, depreciation, and amortization.

A delayed revival in volumes had led to a cut in earnings estimates for Page. Kotak Institutional Equities has trimmed its FY2024-26 earnings per share estimates by 6-9%, as they bake in lower-than-expected revenue performance while largely retaining margin estimates.

Meanwhile, Page is seeing employees exiting at senior levels—the chief operating officer resigned last week. The company has a proper transition planned and is confident of managing with the current team. But it remains to be seen if the new management can help Page turn over a new leaf.

To be sure, muted earnings over the past few quarters have meant a 21% drop in shares of Page in the last one year. The stock trades at 52 times its FY25 estimated earnings, showed Bloomberg data. While valuations don’t seem pricey given Page’s high return ratios, consistent revenue growth is a key catalyst to the stock’s future course.

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