Q3FY23 Review: Page Industries: Sharp slowdown in growth

10 Feb 2023 , 11:09 AM

Page reported Q3FY23 results below analysts’ of IIFL Capital Services estimates with sales miss of 8%. Ebitda/PAT declined by 23%/29%, primarily due to negative operating leverage from low sales growth (3%). While primary sales were impacted due to one-time channel inventory correction, overall demand trends were subdued. 

Even excluding the impact of ARS implementation, sales growth was below management expectations. Management indicated a general weakness in demand trends, especially in the Athleisure category due to return to formal trend post Covid. While demand trends have not improved in Q4YTD, management is hopeful of witnessing a pickup in Q1FY24. Gross margin would improve with high-cost inventory broadly utilised; Ebitda margin could remain under pressure due to negative operating leverage.

Demand situation remains subdued across most consumer discretionary categories. Even as Page continues to focus on distribution expansion and under-penetrated segments of Athleisure, Women’s innerwear and kids, a broad pickup in consumption is required to uplift growth to double digit levels. Analysts’ of IIFL Capital Services lower their sales estimate in FY24 from 15% earlier to 11% to factor in a gradual recovery in demand. They downgrade our EPS estimates by 13%/11%/10% for FY23/24/25 to factor in the Q3 miss and downgrade in FY24 sales estimate.

Analysts’ of IIFL Capital Services downgrade their EPS estimates by 13%/11%/10% for FY23/24/25 to factor in the Q3 miss and a gradual recovery in demand. Even though the stock has corrected 23% in the past three months, it lacks near-term triggers.

Analysts’ of IIFL Capital Services maintain reduce with target price of Rs 39000.