Page Industries to continue clocking 20% top line growth, expect analysts

Page Industries witnessed a 164 bps expansion in its Ebitda

With the interim Budget providing a boost to the consumer sector, the stock of Page Industries rose 3 per cent in three sessions, versus a mere 0.2 per cent rise in the Nifty India Consumption index. 

The stock saw some profit-booking thereafter and fell 1.7 per cent to Rs 23,964.5 apiece on Thursday, despite its December quarter results indicating a rebound in financial performance. Analysts are, however, positive and see the correction as an opportunity for investors. 

After two quarters of dismal performance, the Indian maker of Jockey men’s and women’s innerwear clocked 18.9 per cent rise in net revenues to Rs 738.3 crore, and 22.2 per cent growth in net profit to Rs 101.9 crore, compared to the year-ago period. 

Analysts had pegged figures for the same at Rs 717.6 crore and Rs 98.3 crore, respectively. The festive season including Diwali in Q3, besides stability after the implementation of the goods and services tax (GST), are seen as key reasons for the overall volume-driven top line growth. Volumes are estimated to have grown 11-12 per cent in Q3, against 4.5 per cent during April-September (H1FY19). 

Further, a favourable sales mix, with rise in share of more profitable/high-priced portfolio such as women’s wear, aided the top line and profitability. Though Page did not share segmental information for Q3, volume share of the women’s wear segment was up from 22 per cent in the June quarter, to 23 per cent in the September quarter, and analysts estimate it to have risen further in Q3. 

This sales mix, along with lower cotton prices (down 6 per cent sequentially) pushed up profit margins. Cost of raw materials as a percentage of revenue fell 150 basis points (bps) year-on-year to 43 per cent. 

As a result, Page witnessed a 164 bps expansion in its Ebitda (earnings before interest, tax, depreciation and amortisation) margin to 22.4 per cent in Q3. Lower employee costs, too, supported the overall traction in margins.

Going ahead, analysts believe the company will continue clocking 20 per cent top line growth. Though competition has increased significantly from local players/other brands, a strong reach as well as high brand recall should help Page increase its market share. 

In addition, its foray into the kids’ segment last year and the focus on women’s wear segment, as shown by past quarters’ data, should aid earnings. However, a P/E ratio of 50-51 times its FY20 estimated earnings leaves little room for disappointment.