Mumbai: When Page Industries Ltd, which sells Jockey innerwear, announced lacklustre earnings for the March quarter, its shares had declined 10% in a single day back then. Unfortunately, one more quarter down the line, there is little respite. In fact, on a sequential basis, the situation has worsened on the volume growth front.

In the March quarter, Page Industries’ volumes rose about 1%, but during April-June, they declined 2%. Sure, revenue has risen year-on-year in the June quarter compared to the March quarter when revenue growth was flat. However, June quarter’s revenue growth of 2.4% is hardly the stuff of inspiration.

Commenting on the second consecutive quarter of muted revenue growth, analysts from Dolat Capital Market Pvt. Ltd, in a report on 8 August, said “we attribute this to slowdown in the economy and low footfalls in EBO’s (exclusive brand outlets)."

Ebitda margin, adjusted for the impact of Indian Accounting Standard (Ind-AS) 116-related changes, declined 190 basis points year-on-year to 21.3%. Muted revenue growth and higher employee costs weighed on the margin. Ebitda is earnings before interest, tax, depreciation and amortisation. One basis point is one-hundredth of a percentage point.

Net profit declined 11% to 110 crore in April-June.

Analysts from Kotak Institutional Equities said in a report on 8 August, “The weak and disappointing earnings print aside, the big takeaway for us was the management repeatedly indicating the need for an uptick in external factors (economy, market) for growth to revive back to healthier levels…for a company that has historically defied challenging market backdrops (post-GFC, the slow 2013-16 phase, demonetization, GST, etc.), this seems to be a new reality."

On Friday, shares of Page Industries traded about 5% lower, in response to the disappointing June quarter performance. Sure, valuations have corrected meaningfully given the nearly 30% drop in share price so far this calendar year. Still, the stock trades at about 45 times estimated earnings for financial year 2020, which is not particularly cheap, considering there are no visible signs of demand improvement from a near-to-medium term perspective. Plus, if competition intensifies, the going can get tougher.

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