Q3FY24 Review: Page Industries: Volume growth is back

9 Feb 2024 , 02:14 PM

Page Industries reported a volume growth of 4.6% after posting four consecutive quarters of large declines in volumes. Even as the demand environment remains subdued, Page is likely to witness double digit volume growth in coming quarters, driven by a favourable base. Valuation at 57x FY25 EPS is at the lower end of the consumer discretionary pack and a revival in demand in the near term could result in earnings’ upgrades. Analysts of IIFL Capital Services see limited downside at these levels and upgrade their RECO on the stock from REDUCE to ADD with a target price of ₹37,150. 

Below estimates: 

Page reported a volume growth of 4.6% YoY after four consecutive quarters of large volume declines, owing largely to the base catching up. Net sales grew 2.4% (in-line) with average realisation down 2% owing to lower mix of athleisure category. Ebitda grew 19% (7% below analysts of IIFL Capital Services estimate) driven by tight cost control across employee and other overheads. The implementation of auto replenishment system (ARS) has resulted in a reduction of three days of inventory at the distributor level during the year, which has also impacted primary sales. 

Demand environment remains subdued: 

Overall demand environment continues to be lukewarm although the channel health has improved post implementation of ARS by Page. The intensity of discounting by the channel (largely pertaining to Page’s competition) has reduced significantly from the high levels of 1H. While the company would be rolling out a distributor management system, it doesn’t expect any major disruptions in its sales performance in the medium term. 

Upgrade from REDUCE to ADD: 

Analysts of IIFL Capital Services downgrade their FY24/25 EPS estimates by 2%/4% to factor in the Q3 miss and the tepid demand environment, but broadly maintain their FY26 EPS estimate. A favourable base would aid a double digit volume growth for the next three quarters for Page Industries in absence of any major disruptions in primary sales. The benefit of lower cotton prices is also likely to flow through in coming quarters. Valuation at 57x FY25 EPS is at the lower end of the consumer discretionary pack and analysts of IIFL Capital Services believe there is limited downside at these levels. Revival of demand in the near term could result in earnings’ upgrades. Analysts of IIFL Capital Services upgrade their RECO from REDUCE to ADD with a target price of ₹37,150.