Reduce Page Industries; target of Rs 39,450: Emkay Global Financial

Emkay Global Financial' research report on Page Industries

Muted trends persisted, with 3-4% growth in Q2/H1; however, growth picked-up toward end-Q2, aided by early festive, per the mgmt . PAG attributed the sluggish trends to weak macros and gave assurance on nil market share loss, based on retention of shelf space/feedback from modern trade channels. Growth impact related to ARS mismatch is also largely behind. New innovations kicked off well, with JKY Groove executing better than PAG’s internal expectations and healthy sell-throughs to the recently-launched bonded tech innerwear. EBITDA margin declined by 90bps at 21.7% in Q2, on wage hikes, employee hiring, and higher marketing, while gross margin improved by ~350bps to ~60%. Among channels, E-com still leads growth, while physical channels (EBO/MBO) are seeing muted LFL trends. We believe growth revival in GT channel (high salience) is key to growth recovery for PAG. We would keep a look out for any initial signs of recovery in the GT channel as well as ramp-up of new launches (JKY Groove/Bonded tech IWs), as value fashion (though a new ball-game for PAG) is gaining healthy traction in the apparel space.

Outlook

We retain REDUCE on PAG and Sep-26E TP of Rs39,450 (45x P/E), as sub-par growth trends continued in Q2. PAG’s Q2 EBITDA was 6-18% lower than street’s/our estimates, on a 2-6% revenue miss and 100-300bps lower EBITDA margin.