Q1FY24 Review: Page Industries: Volume decline continues

11 Aug 2023 , 01:17 PM

Page’s Q1FY24 results were below estimates with a thirdstraight quarter of double-digit volume decline. At 19.5%, Ebitda margin was reasonable given the weak sales performance. Higher inventory levels for the industry with trade channels will continue to weigh on near-term performance, even as management is hopeful of a buoyant festive season to drive top-line growth in Q3 (on a soft base). Analysts of IIFL Capital Services broadly maintain their EPS estimates and reiterate REDUCE rating with a target price of Rs 38,500. 

Below estimates: 

Page reported Q1FY24 results below estimates with sales declining by 7.5% (5% below IIFL Capital Services estimate), driven by a volume decline of 11.5%. Sales growth was impacted by continued sluggish demand conditions, increased competition and a high base. Management curtailed employee costs and expenses related to logistics, travel, selling and distribution, etc., and reported Ebitda margin of 19.5% that is reasonable, given the weak sales performance. Ebitda/PAT declined by 19%/23.5% and were 9% below analysts of IIFL Capital Services estimate. 

Ebitda margin guidance of 19-21% for FY24: 

Even though there has been some improvement in demand trends in recent weeks, management sounded cautious in calling out a recovery. It remains hopeful of a buoyant festive season on a weak base in Q3. In terms of Ebitda margin, management sounded confident of clocking it in the range of 19-21% in FY24, without curtailing ad-spends. 

Broadly maintain analysts of IIFL Capital Services EPS estimates: 

Inventory levels for the industry with trade channels are higher than normal; unless these correct, Page’s near-term sales performance is likely to stay weak. Analysts of IIFL Capital Services build in recovery in volume growth from Q3 onwards, partially aided by a low base. They forecast 8% sales growth in FY24, which would require a 14% growth in the remaining 9 months (on a soft base impacted by ARS disruption). At 55x FY25 EPS, valuation remains expensive and they find the risk-reward unfavourable, especially given the near-term challenges. Analysts of IIFL Capital Services broadly maintain their estimates and maintain REDUCE rating on the stock with a price target of Rs38,500.