Credit Suisse downgrades Page Industries after weak Q4; stock falls 9%

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Global brokerage house Credit Suisse downgraded Page Industries, which is also known as Jockey India, to underperform from neutral after disappointing earnings for the quarter ended March 2019.

The research house also slashed target price by 19 percent to Rs 18,700 from Rs 23,221 apiece earlier after cut in FY20-21 earnings estimates by 9-11 percent.

"Q4 results significantly below estimates; profit declined 20.4 percent YoY. The slump in growth rate is concerning as it comes on a relatively weak base," Credit Suisse said.

The brokerage sees further deterioration of an already weak trend, and in addition, it said the management has not yet seen a pick-up in Q1FY20.

The extent of weakness in the company is very high compared to peers, the research firm feels.

The licensee of Jockey International and Speedo in India reported profit at Rs 75 crore in March quarter against 94 crore in the same period last year. The management attributed weak performance to a slowdown.

For the year ended March 2019, inventory jumped 32 percent to Rs 750 crore and borrowing increased 45 percent to Rs 72 crore compared to the previous year.

Revenue from operations during the quarter declined 0.1 percent to Rs 607 crore, and operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) fell 18.5 percent year-on-year to Rs 119 crore with margin contraction of 440 bps YoY.

Volume growth for FY19 was 5.6 percent and for Q4FY19 was 1.1 percent. Page had increased its product prices by 4-5 percent across categories.

Last year, the company had incentive reversal and GST credit which were one-offs and benefitted Q4FY18, but FY19 performance was below company's expectations.

At 0925 hours, the stock was trading at 20,023.50, down 8.86 percent or Rs 1,946.

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