Neutral Page Industries; target of Rs 37,200: Motilal Oswal

Motilal Oswal's research report on Page Industries

PAG reported weak 4QFY23 results. Volume declined 14.6% YoY, while sales declined 12.8% (highest decline in sales since FY12, excluding the Covidimpacted period). Even the EBITDA margin of 13.9% was the lowest in over a decade in a non-Covid-hit quarter, affected by the lack of fixed cost absorption due to a volume decline and the consumption of high-cost inventory during the quarter. While material consumption costs are likely to ease going forward as indicated by the management, a recovery in sales to double-digit growth appears uncertain in the near term due to the implementation process of Auto Replenishment System (ARS) and increased competitive intensity in the post-Covid period. Maintain Neutral on the stock.

Outlook

PAG’s medium-term earnings prospects have improved due to investments made in distribution, designs, and technology. RoCE is likely to be ~45% after falling to the late 30s in FY20/FY21. However, since the valuation at 53x FY25E EPS is expensive, we reiterate Neutral with a TP of INR37,200.

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