Neutral Page Industries; target of Rs 38,660: Motilal Oswal

Motilal Oswal's research report on Page Industries

PAG reported a strong performance in 2QFY22, with all segments delivering a sales growth of ~40% YoY on a weak base. With in-home consumption dominating in recent quarters, the Athleisure segment has been a key driver on a two year CAGR basis. During the same period Men's Innerwear (~40% of sales) has seen a tepid performance after declining sharply in 1HFY21. Two-year sales CAGR of ~18% is likely to have been led primarily by: a) an extraordinary and unsustainably high growth in the Athleisure segment, driven by in-home consumption during the lockdowns, b) significant and ongoing expansion in distribution network, c) improved growth in Women's Innerwear compared to its 4-5 year average, and d) reportedly strong traction in the Small Kids Innerwear segment in which the company has been a recent entrant. While topline growth, led by the above three factors, is sustainable, overall sales growth in mid-teens cannot be sustained when Athleisure demand tapers off from FY23E onwards and until PAG's largest segment (Men's Innerwear) starts showing signs of traction. We maintain our Neutral rating.

Outlook

However, the momentum needs to pick up in Men's Innerwear. The momentum in the Women's Innerwear business needs to sustain, especially as factors favoring the rapid growth in the Athleisure segment would not be present beyond FY22E. Valuations at 80x FY23E EPS are expensive. We maintain our Neutral rating, with a TP of INR38,660/share (65x Dec'23E EPS).

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