Festival season brings little cheer for Jockey manufacturer Page Industries

Topline for the September quarter grew at the slowest pace of 10 per cent; net profit too was up just 10 per cent

For quality stocks that trade at premium valuations amid expectations of strong growth rates, there is no leeway for disappointment.

This what happened with Page Industries. The Indian franchise and manufacturer of Jockey innerwear reported lower-than-expected numbers for the September quarter (Q2) on Wednesday, mainly due to the shift in festive season from Q2FY19 to the current quarter, indicating high chances of an improved performance in the December quarter. 

Yet, the stock fell about 5 per cent to Rs 27,880, even as the BSE FMCG index was up 0.9 per cent on Wednesday. 

Page doesn’t divulge volume figures, but with a delayed festive season, analysts estimate the firm may have witnessed flat volume growth in Q2. 

As a result, top line grew at its slowest pace of 10.4 per cent on a year-on-year basis to Rs 6.9 billion, driven by realisation, as Page had taken 10-12 per cent price hikes in Q2. 

According to Bloomberg, analysts were expecting net sales of Rs 7.5 billion in Q2. Analysts believe volumes from men’s segment may have fallen around 3 per cent and for women’s segment to have risen by 4 per cent in the second quarter.

The subdued top line growth also restricted profitability with almost flat gross profit margin of 57.8 per cent. 

Earnings before interest, tax, depreciation and amortisation (EBTIDA) margin, too, remained almost at the year-ago level of 20.7 per cent. Page clocked 10.2 per cent YoY rise in net profit to Rs 926.3 million in Q2, over 15 per cent lower than Rs 1.1 billion as anticipated by the analysts.

Analysts see the Q2 disappointment as a blip, and expect Page’s performance to improve in the ensuing quarters. 

“Though the Q2 performance was impacted due to a shift in the festive season, we believe it will improve going ahead. With an expected strong earnings potential, Page would continue enjoying pricey valuation,” says an analyst with a domestic brokerage.

After the latest correction, Page still trades at above 55 times its FY20 estimated earnings. Clearly, there is little room to disappoint investors again.