Page Industries Ltd.’s shares are pricey and that would be the main problem for its investors.
The stock has risen about 45 percent so far in 2021. This means further appreciation in the share price could be tough. Based on the average estimates of four brokerages, the stock trades at about 68 times its FY23 earnings per share (EPS).
Moreover, it remains to be seen if the momentum in the athleisure segments continues. The performance of men’s innerwear is another monitorable for investors.
Page is the exclusive licensee for the manufacture, distribution and marketing of the Jockey brand in India, Sri Lanka, Bangladesh, Nepal and the United Arab Emirates.
“The momentum needs to pick up in men’s innerwear,” analysts from Motilal Oswal Financial Services wrote in a report on November 11. “The momentum in the women’s innerwear business needs to sustain, especially as factors favouring the rapid growth in the athleisure segment would not be present beyond FY22E.”
The broker added that women’s innerwear sales have apparently gained some traction and kids’ innerwear has gotten off to a good start.
Page’s September quarter (Q2FY22) results are impressive, with the company announcing its highest-ever revenue and profit after tax (PAT). The stock hit a new 52-week high of Rs 40,580 on the National Stock Exchange on November 11, the day the results were declared.
Revenue increased 46 percent year-on-year to Rs 1,084 crore on the back of strong volume growth. The company had a relatively softer base given that revenue had declined by 4.5 percent in the September quarter last year. Even so, revenue is 40 percent higher than in Q2FY20, a pre-pandemic quarter.
“Volumes recovered on the back of easing lockdown restrictions, larger distribution reach, recovery of modern trade, exclusive brand outlets addition and robust growth in e-commerce sales,” analysts from Kotak Institutional Equities said in a report on November 12.
Page’s EBITDA (earnings before interest, tax, depreciation and amortisation) margin contracted by 80 basis points to 21.5 percent. One basis point is one-hundredth of a percentage point.
To be sure, Page’s margin performance has been rather resilient despite the sharp increase in cotton prices. The upshot: Page’s EBITDA in Q2 rose by 41 percent year-on-year.
However, the stock’s sharp run-up may keep further meaningful upsides at bay in the near future.
“Success of Page’s new categories and distribution expansion are key to near-term growth,” Kotak pointed out. “We raise our FY2022-24E EPS by 4-8 percent. However, we downgrade the stock to SELL on account of expensive valuations with a revised fair value of Rs 35,400 (Rs 30,100 earlier).”
Page’s shares gained 0.2 percent to Rs 40,259.95 on the NSE at 1.04 pm.
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