Page Industries’ Q1 is muted, but stock valuation is pricey | Mint
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Business News/ Markets / Mark To Market/  Page Industries’ Q1 is muted, but stock valuation is pricey
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Page Industries’ Q1 is muted, but stock valuation is pricey

The firm’s Ebitda margin was lower primarily due to under-absorption of wages, selling and corporate overheads

Revenues declined by 43% quarter-on-quarter to ₹501 crore even as a favourable base boosted growth on a year-on-year basis.Premium
Revenues declined by 43% quarter-on-quarter to 501 crore even as a favourable base boosted growth on a year-on-year basis.

Page Industries Ltd’s shares fell more than 3% on Friday on the National Stock Exchange, following its subdued June-quarter results (Q1FY22).

The company’s numbers show the impact of the pandemic-related disruptions on sales.

Revenues declined by 43% quarter-on-quarter to 501 crore even as a favourable base boosted growth on a year-on-year basis. But revenues are still 40% lower compared to Q1FY20, so performance isn’t exciting enough.

Within segments, athleisure, kids and women’s innerwear saw stronger growth compared to men’s innerwear. As such, a pick-up in men’s innerwear would go a long way in improving sentiments for the stock, said analysts.

Q1FY22 profitability, too, was nothing to write home about. Earnings before interest, tax, depreciation and amortization (Ebitda) margins contracted as much as 1,250 basis points (bps) on a sequential basis to 6.8%. One basis point is 0.01%. Note that gross margin was flattish sequentially, but weak operating leverage hurt the Ebitda show. Ebitda margin was lower primarily due to under-absorption of wages, selling and corporate overheads, the company said.

 

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“Slower-than-expected recovery and lower-than-estimated margins in July have led to a 5.4% reduction in our FY22 earnings per share (EPS) forecasts, even as our FY23 EPS has been cut by just 1.9%," said analysts from Motilal Oswal Financial Services Ltd in a report on 12 August.

Page Industries told analysts that July sales recovery is healthy and similar to April. To be sure, the athleisure segment is expected to have a good run in the near future as consumers are likely to spend more time at home.

“However, momentum needs to pick up in men’s innerwear and the women’s innerwear business needs to sustain, especially as factors favouring rapid growth in the athleisure segment would not be present beyond FY22," said analysts from Motilal Oswal.

Based on Bloomberg data, Page Industries’ shares trade at around 61 times estimated earnings for FY23. To be sure, valuations are not cheap.

“Key risks would be intense competition in innerwear and raw material inflation impacting growth or margins and prolonged operational restrictions," said analysts from YES Securities Ltd in a report on 12 August.

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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi Pengonda is a financial journalist producing cutting edge commentary and analysis on companies, economy and market trends. Over her journalism career spanning more than 14 years, she has covered topics across sectors such as oil & gas, consumer, aviation and new age tech companies. She heads the Mark to Market team and joined Mint in June 2010. She lives in Bengaluru. She is an art enthusiast and likes to paint in her leisure time.
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Published: 16 Aug 2021, 01:43 AM IST
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