Neutral Page Industries; target of Rs 39,080: Motilal Oswal

Motilal Oswal's research report on Page Industries

PAG posted a muted 1QFY24 performance due to a slowdown across all categories, resulting in a 23.5% YoY drop in Adj. PAT. There was a strong improvement in QoQ basis. Volume declined 11.5% YoY but grew 31% QoQ.  GP margin contracted 160bp YoY and 370bp QoQ. EBITDA margin also dropped 270bp YoY but improved QoQ due to low product costs and better overhead absorption. The management expects to maintain EBITDA margins within the 19-21% range. The medium-term sales and earnings outlook remains uncertain for PAG. We maintain our Neutral rating on the stock due to elevated valuations.

Outlook

PAG’s medium-term earnings prospects have improved because of investments made in distribution, designs, and technology. RoCE is also likely to be ~40%, after falling to the late 30s in FY20 and FY21. However, the valuation at 55x FY25E EPS is expensive; hence, we reiterate our Neutral rating on the stock with a TP of INR39,080.

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