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Home / Markets / Mark To Market /  Page Industries’ Q4 show may back stock’s pricey valuations

MUMBAI : Page Industries Ltd’s shares trade at expensive valuations. Based on Bloomberg data, the stock’s price-to-earnings multiple stands at around 72 times estimated earnings for FY22.

While high valuations may cap significant upsides in the foreseeable future, the innerwear maker’s strong March quarter results may well lend support to the stock.

Revenues jumped by almost 63% year-on-year (y-o-y) to 881 crore in Q4FY21—the second-highest for any quarter, according to the company. True, a favourable base helped considering revenues had fallen 11% a year earlier. Even so, the performance is better than expected, helped by a robust performance by the athleisure portfolio.

“For the first time since 3QFY19, Page has reported double-digit two-year average volume growth in 4QFY21," said analysts from Motilal Oswal Financial Services Ltd in a 27 May report.

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Satish Kumar/Mint


Needless to say, investors would watch whether the momentum sustains. “While there seems to be a potential recovery to double-digit volume growth, it would still be below the nearly 30% sales CAGR seen over FY08-18," the analysts said. CAGR is compounded annual growth rate.

Earnings before interest, taxes, depreciation and amortization or Ebitda margin contracted by 510 basis points to 19.3%, disappointing some analysts. The sequential drop in margins is due to an increase in staff costs and other expenses. Ebitda margin expanded y-o-y helped by operating leverage.

Margins could well improve from hereon. “We believe Page will tinker with product pricing and ad spends to maintain full-year Ebitda margin around the 21% mark," said analysts from Kotak Institutional Equities in a report on 28 May. In FY21, Ebitda margin stood at 18.6%.

To be sure, Page has put up a strong revenue show in the past two quarters. This has curtailed the y-o-y drop in FY21 revenues to just around 4%, which is commendable given that Q1 was a washout due to the lockdown. The second covid wave is expected to adversely impact near-term financials. “Success of new categories (such as kidswear) and entry into new geographical areas are key to near-term growth," Kotak analysts said.

Investors are likely to look beyond the near-term worries. Kotak has revised down FY22 revenue/earnings per share estimates by 1.5/3.5%, respectively, but has broadly retained its FY23 estimates.

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