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This report has been updated
The stock of Page Industries is down about 11 per cent since the start of the year on worries that weak demand, higher competitive pressures, and lack of pricing power could put pressure on realisations going ahead. While some brokerages have retained a reduce or sell rating given demand pressures, others believe that the company will witness a gradual volume recovery aided by growth drivers and a strong distribution reach.
The stock of Page Industries is down about 11 per cent since the start of the year on worries that weak demand, higher competitive pressures, and lack of pricing power could put pressure on realisations going ahead. While some brokerages have retained a reduce or sell rating given demand pressures, others believe that the company will witness a gradual volume recovery aided by growth drivers and a strong distribution reach.
The December quarter performance was impacted by the weak showing in the athleisure category. While a 4.6 per cent volume growth helped the company’s topline grow 2.4 per cent, it was offset by a 2 per cent fall in realisations due to lower growth in the athleisure segment.
The trend of lower realisations is expected to continue going ahead. Garima Mishra and Shubhangi Nigam of Kotak Research expect realisations to remain sluggish in FY25 due to discounting by competitors, muted demand, and an inferior mix as athleisure sales lag and the company possibly introduces more products at its entry-level pricing.
While the company has posted consistent realisation growth driven by mix and price hikes; FY2025 may, however, see a trend reversal in both these levers, says the brokerage. It has a sell rating on the stock and has revised down its target price to Rs 31,000 a share. Kotak Research has cut FY25 and FY26 revenue growth estimates by 7-8 per cent citing a lack of a price hike and weaker mix which will impact FY2025 revenue growth with volume growth likely to be the sole revenue driver.
Axis Capital, too, believes that near-term recovery is unlikely. Analysts led by Gaurav Jogani of Axis Capital highlight that Q4 is usually the weakest quarter for Page, which this time around is aggravated by a slowdown in overall discretionary consumption.
Segmental performance has been a mixed bag with recovery in demand for certain categories, while athleisure continues to struggle owing to high system inventory and discounts by competition. The company’s problem is further aggravated as it has refrained from aggressive discounting and raising channel margins which is resorted to by other players to clear inventory, says the brokerage. While Axis Securities has cut its FY24-26 earnings per share estimates by 1-5 per cent and has reduced the target price to Rs 39,000 a share, they have maintained an add rating.
A positive for the company is lower raw material and product costs as prices of cotton have been moving lower and there is low-priced inventory. Brokerages expect gross margins to remain steady while higher investments could impact operating profit margins in the near term.
UBS Securities is positive about the outlook for Page Industries. Ashutosh Joytiraditya and Amit Rustagi of the brokerage expect double-digit revenue growth in the medium term. This is on the back of a robust distribution network across various channels, strong brand recall, in-house production (over 70 per cent) and back-end capability, strict working capital management, and a strong balance sheet. The brokerage has a buy rating on the stock and its target of Rs 44,000 is based on 55 times its FY26 earnings which is in line with Page's five-year average. There are limited downside risks for the stock which is expected to re-rate to its historical average multiple in the medium term, says UBS.
