Weak Q4 performance drags Page Industries to 19-month low; stock sinks 15%

The company said it experienced some impact on profitability due to higher inventory levels acquired during an inflationary period and lower than optimal capacity utilization.

Shares of Page Industries hit 19-month low of Rs 34,968.60, as they tanked 15 per cent on the BSE in Friday's intra-day trade after the company reported disappointing set of numbers for the quarter ended March 2023 (Q4FY23). The stock of garments & apparels maker quoting at its lowest level since October 2021. It has corrected 36 per cent from its 52-week high of Rs 54,262, touched on October 21, 2022.

At 09:53 AM; Page Industries was trading 12 per cent lower at Rs 36,250, as compared to 0.34 per cent rise in the S&P BSE Sensex.

In Q4FY23, Page Industries' revenue declined 12.8 per cent year-on-year (YoY) and 20.8 per cent quarter-on-quarter (QoQ) at Rs 969 crore, against Rs 1,111 crore in a year ago quarter.

Earnings before interest, tax, depreciation and amortisation (Ebitda) margins contracted sharply by 1018 bps YoY to 13.9 per cent. Owing to weak operational performance, profit after tax declined by 59 per cent YoY to Rs 78.4 crore.

The EDITDA margin 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.

Page Industries said the company experienced some impact on profitability due to higher inventory levels acquired during an inflationary period and lower than optimal capacity utilization. The management considers this impact to be temporary and maintain a positive outlook on demand.

The current market correction and softening of demand is temporary and the company will continue to build for the future in terms of products, teams, distribution, and technology, the company said.

Page Industries is the exclusive licensee of JOCKEY International (USA) for manufacture, distribution and marketing of the JOCKEY brand in India, Sri Lanka, Bangladesh, Nepal, Oman, Qatar, Maldives, Bhutan and UAE. Page Industries is also the exclusive licensee of Speedo International for the manufacture, marketing and distribution of the Speedo brand in India.

The revenue trajectory has been challenging in H2FY23 mainly due to weak demand in the market and the implementation of Automatic Replenishment System (ARS) across the organisation which impacted the primary sales. The impact of ARS implementation is likely to prevail in the upcoming quarters and sales is expected to remain subdued in H1FY24E, according to ICICI Securities.

The margins since the past two quarters have been lower than the normal range of 21-22 per cent owing to lower absorption of fixed cost and increased advertisement spend during the quarter. Furthermore, on the balance sheet front, inventory days inched up from 92 days to 120 days owing to higher stocking on anticipation of better demand. The liquidation of the same would take some time owing to subdued market, the brokerage firm said in a note.

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 ARS and increased competitive intensity in the post-Covid period, Motilal Oswal Financial Services said.

Page Industries medium-term earnings prospects have improved due to investments made in distribution, designs, and technology. RoCE is likely to be 45 per cent after falling to the late 30s in FY20/FY21. However, since the valuation at 53x FY25E EPS is expensive, we reiterate Neutral with a target price of Rs 37,200, the brokerage firm said in result update.

Technical View

Bias: Negative

Support: Rs 34,960

Resistance: Rs 38,550

With today's sharp fall, the stock has cracked sharply below all its key moving averages and the lower-end of the Bollinger Bands on the daily chart. Hence, the near-term outlook is likely to be negative as long as the stock trades below Rs 38,550.

In case, the stock is able to clear the hurdle, it can bounce back to Rs 40,000-mark.

On the downside, today's low of Rs 34,960 remains crucial, as it is the super trend line support on the monthly chart.

(With inputs from Rex Cano)