Page Industries Ltd
Demand pressures may hit Page Industries
Mar 28,2024
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 top line 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
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; FY25 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 ~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 FY25 revenue growth with volume growth likely to be the
sole revenue driver.
Axis Securities, too, believes that near-term recovery is unlikely.
Analysts led by Gaurav Jogani of Axis Securities highlights 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 ~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 strong balance sheet.
The brokerage has a buy' rating on the stock and its target of ~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.