Page Industries badly needs to script a new chapter on growth

Representative image (Photo: iStock)
Representative image (Photo: iStock)


In Q3, Page’s revenues grew by just 3% year-on-year. But in Q4, revenues have fallen by almost 13% to 969 crore with a 14.6% drop in volume.

Page Industries Ltd’s shares are trading 24% below 52-week highs seen in October. The company is facing two problems. One, demand is not picking up enough and two, implementation of auto replenishment system is taking longer. In this backdrop, March quarter results (Q4FY23) show growth momentum slowed further.

In Q3, Page’s revenues grew by just 3% year-on-year. But in Q4, revenues have fallen by almost 13% to 969 crore with a 14.6% drop in volume. “Volumes were impacted by muted demand and ARS implementation," said the company’s management.

Further, high-cost inventory and lower absorption of costs weighed on operating performance. The upshot is that Page’s Ebitda halved to 134 crore and margin contracted sharply by 1018 basis points to 13.9%, a multi-quarter low.

Page Industries revenue data
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Page Industries revenue data

Now, weak revenue and volume has led to high inventory levels. With demand still subdued, inventory could take longer to liquidate. “The offline channel is seeing weak sales as consumers are postponing buying decisions. Demand remai-ned weak in April as well, across product category, but premium products have done relatively better," said the management.

Post Q4 results, analysts are likely to cut earnings estimates of the company. “The ARS will take two more quarters to streamline, and April has seen a weak start year-on-year, so FY24 performance could be lower than expected. Plus, market conditions are muted. We are expecting consensus FY24 earnings per share estimates to be trimmed by over 10%," said Akhil Parekh, senior vice president, Centrum Broking.

While the management has taken cost control measures to protect margins, benefits will flow gradually. It expects Ebitda margin to recover to 18-20% going ahead. Further, with no price hikes to be taken in near term, volume growth is crucial. “The company is massively expanding retail stores, despite that if sales don’t grow then that is bothersome and could keep stock under pressure," he said.

But Page’s valuations are steep. The stock trades at 49x FY25 estimated earnings, showed Bloomberg data. “The stock’s valuation is not attractive enough given the challenges such as stiff competition in the women’s wear segment (from MNC and D2C brands)," said Varun Singh, AVP at ICICI Securities. Further, tailwinds from faster growth in athleisure segment will be tepid for now. Singh says near-term outlook is bleak and ARS implementation is an overhang for the stock.

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