Q2FY24 Review: Page Industries: Weakness persists

10 Nov 2023 , 11:49 AM

Page reported a fourth consecutive quarter of close to double digit volume decline (9% this quarter) as sales performance continued to be impacted by multiple factors. Management remains hopeful of a pick-up but is yet to see any meaningful recovery in its segments. Analysts of IIFL Capital Services downgrade their EPS estimates by 7-9%, factoring in the Q2 miss and a more gradual recovery going ahead. Maintain REDUCE with a TP of Rs37,200. 

Below estimates: 

Page reported Q2FY24 results below analysts of IIFL Capital Services estimates with a fourth consecutive quarter of close to double digit volume decline (9% in Q2FY24). While sales declined by 8% (10% below IIFLe), Ebitda decline was lower at 2% as the company curtailed on employee and other expenses. Sales performance continued to be impacted by weak demand conditions, a bloated channel inventory and resultant increase in competitive intensity. In addition, Page has been rationalising its MBO reach after aggressive expansion witnessed during Covid. A delayed festive season also played its part in dampening the 2Q performance. 

Cautious tone on outlook: 

Management stated that while consumption trends have been positive so far in Q3, there has been no material improvement in urban and mid-premium categories. The weakness is across all sub-categories with women’s innerwear performing slightly better than the rest. Sales through the EBO channel which is a more accurate reflection of end consumer demand for Page, also witnessed a decline in Q2, albeit lower than overall company. 

EPS downgrade of 7-9% over FY24-26: 

Analysts of IIFL Capital Services factor in a more gradual improvement in sales growth trajectory for Page which is translating into an EPS downgrade of 7%/6%/9% over FY24/25/26. They forecast flat volumes YoY in H2 (adjusted for the ARS impact in H2FY23) and build a 14% sales growth in FY25/26. Valuations are reasonable at 55x FY25 EPS, but a meaningful recovery may still be a quarter away. Delay in recovery would lead to further EPS downgrades even as couple of senior management exits recently, raise fresh concerns. Maintain REDUCE rating with a target price of Rs37,200.