Neutral Page Industries; target of Rs 36,500: Motilal Oswal

Motilal Oswal's research report on Page Industries

PAGE continues to experience a weakness in growth amid subdued demand in the apparel industry. Weak demand has resulted in excess inventory at channel partners. Management is taking several initiatives to optimize channel inventory. The industry is expected to continue facing demand-led headwinds in the near term. Margins of innerwear companies were affected by increased discounts and volatile raw material prices. Additionally, companies had to increase advertising and promotion (A&P) expenses to stimulate volume growth, which affected operating margins. However, with demand showing signs of improvement, management indicated that the contraction in operating margins has ceased. PAGE is witnessing a gradual inventory adjustment towards an optimal level. This will increase full-priced sales, thus improving margins. Raw material prices spiked during 2020-22, but since then, prices have softened. Although raw material prices have increased recently, they are still within a broad range. We expect stability in raw material prices to continue. We model a 55-56% gross margin during FY25/FY26. We expect PAGE’s revenue to grow at 14% CAGR over FY24-26, with an EBITDA margin of ~20% (close to its long-term average).

Outlook

The industry is likely to continue facing demand-led headwinds in the near term. Additionally, it will be crucial to monitor the channel inventory optimization. Though efficient cost-control measure is a positive sign, earnings outlook is still uncertain. We reiterate our Neutral rating on the stock with a TP of INR36,500 (premised on 50x Mar’26E EPS).

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