Are better days ahead for Page Industries?

Page expects to maintain an Ebitda margin of 20-21% on a sustainable basis.
Page expects to maintain an Ebitda margin of 20-21% on a sustainable basis.


Page stock has risen by about 41% in the past year versus 14% gain of Nifty 100. Its valuations are a sore point

Page Industries Ltd’s results for the three months that ended 31 December 2021 (Q3FY22) have prompted some analysts to upgrade their earnings estimates for FY22-23. This comes on the back of the innerwear maker doing well on revenues last quarter and improving demand outlook.

In Q3, revenue stood at 1,190 crore, growing by 28% year-on-year (y-o-y). Volumes rose by around 25%. Here, festive season sales helped. Even so, higher costs kept commensurate profit growth at bay. Earnings before interest, taxes, depreciation, and amortization (Ebitda) margin contracted 330 basis points (bps) y-o-y to 21.1% in Q3. One basis point is 0.01%. The upshot is that Ebitda growth was comparatively low at 11% to 250 crore.

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Page added 36 exclusive brand outlets (EBOs) in Q3, taking the total to more than 1,030.

It helps that the athleisure segment, which benefited from the ongoing covid-19 pandemic, is on a strong footing and the management is upbeat on the prospects. The women’s and kidswear businesses are showing encouraging performance, but investors should watch the growth momentum.

As such, Page expects to maintain an Ebitda margin of 20-21% on a sustainable basis. The company has hiked prices by 8% in December-January to cope with an increase in input costs and the impact of this would reflect in the March quarter. There could also be some influence of the disruptions because of the impact of the Omicron variant of coronavirus in this quarter.

The Page stock has declined by nearly 3% since Q3 results were announced last week, though the shares have appreciated by about 41% in the past one year. In comparison, the Nifty 100 index has gained almost 14% in the same time. Page’s valuations are a sore point, however. The stock trades at around 64 times FY24 earnings per share (EPS) estimates of Motilal Oswal Financial Services Ltd. “While EPS growth of about 20% seems likely, valuations are expensive," said Motilal Oswal’s analysts.

Investors would watch sales performance closely and strong growth rates would enable the company justify its high valuations. “We believe that in 2020-30 volume growth will have to be the key driver of growth, unlike in 2010-20 where Page enjoyed good price/mix benefit (price increases should now be more calibrated, baring periods of high raw material pressure)," said ICICI Securities Ltd. In general, higher competition remains a risk.

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