Page Industries’ shares trade at nearly 62 times estimated earnings for FY23. To be sure, valuations are not cheap. Analysts have pointed out intense competition in inner wear, raw material inflation as key risks
Shares of Page Industries Ltd traded more than 3% lower on the National Stock Exchange on Friday following its June quarter results (Q1FY22). The company’s results show the impact of the pandemic-related disruptions on sales. Revenues declined 43% quarter-on-quarter to Rs501 crore even as a favourable base boosted growth on a year-on-year basis. But revenues are still 40% lower compared to Q1FY20.
Within segments, athleisure, kids and women's inner wear saw stronger growth compared to men’s inner wear. In fact, a pick up in men’s innerwear would go a long way improving sentiments for the stock, going ahead.
Further, Q1FY22 profitability was nothing to write home about. Earnings before interest, tax, depreciation and amortization (Ebitda) margins contracted as much as 1250 basis points (bps) on a sequential basis to 6.8%. One basis point is one-hundredth of a percentage point. Note that gross margin has flattish sequentially, but Ebitda performance was hurt due to weak operating leverage.
“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 was healthy and similar to April. To be sure, the athleisure segment is likely to have a good run in the near-future with consumers 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 favoring 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 nearly 62 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.