Finding volume comfort may be tough for Page Industries; analysts worried

While volumes fall 2% in Q1, analysts are worried about rising competitive intensity

Page Industries has disappointed on the volume front for the second consecutive quarter. After a meagre 1 per cent volume growth in the March quarter, the Indian maker of Jockey innerwear reported 2.4 per cent year-on-year fall in the overall volumes in Q1. 

The weaker volume offtake can be attributed to the overall consumption slowdown weighing on customer footfalls, which also continued after the June quarter, according to the management.

The consumption slowdown was visible across the industry, with players such as Dollar, Rupa, and Lux among those reporting mid-single-digit revenue growth.  

However, what is more worrisome in case of Page is a likely market share loss on account of rising competitive intensity from new players such as Van Heusen. This will continue to remain a key hurdle for Page, even in the near term. 

According to analysts at Motilal Oswal, growth remains a concern for Page with the prevailing trade liquidity crunch, lower volumes after GST implementation, and increasing threat of competition for the first time in the form of Van Heusen. 

Page, however, does not believe the competition is hurting its market share. Many analysts have slashed their FY20 and FY21 earnings estimates for Page by 3-9 per cent and 5-13 per cent, respectively.

Nonetheless, capacity expansion and store additions are likely to keep long-term growth potential intact. While the firm  aims to double its manufacturing capacity in the next five years from 260 million pieces now, it also plans to take total the EBO (exclusive brand outlets) count to 1,000 in the next couple of years, from around 630 at present, and to expand its multiple brand outlets. 

This will be supported by new launches and lower penetration. Overall, the volume growth trend and management commentary on market share will be key for the richly valued Page. 

Though down 19 per cent from historical valuation after the recent correction that followed its June quarter results, the stock’s valuation at 39 times its FY21 earnings estimates is still higher than many FMCG majors.