Page Industries Limited ended the year on a strong note. Despite the disruption caused by the Omicron wave of the coronavirus, revenue in the March quarter grew 26% year-on-year. 1,111 crore, primarily driven by higher value receipts. The Ebitda (earnings before interest, taxes, depreciation and amortization) margin at 24% exceeded the consensus estimate of 20.5%. Page is the exclusive licensee of Jockey International Inc. for the manufacture, distribution and marketing of the Jockey brand in India and certain other countries.
The company’s Q4 results reflect the positive impact of an approximately 8% price increase at the end of Q3. Even in Q1, Page increased prices by 5%. In its earnings call, Page’s management said that sales growth across product categories and sales channels was strong in Q4. Growth was driven by retail expansion and the introduction of new products. The company sold 50 million pieces in the March quarter, representing an 8.7% year-on-year increase. A favorable base aided fiscal 2012 sales volume growth of 29% to 191 million pieces. FY22 Ebitda margin stood at 20%.
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For now, the company has eased inflationary pressures with two rounds of price hikes. Still, inflationary pressures remain a concern for the stock.
“The growth of their business is likely to remain stable as they operate in a virtually monopolistic industry, but remain macro-risk on the inflation front. Akhil Parekh, Analyst, Centrum Broking Ltd. said, “Despite price hike due to their loyal client base, they have seen decent volume growth in FY22.”
The company also benefited from lower cost of inventory during the quarter. The management has said that the price of yarn, its key raw material, has almost doubled in the last 14-15 months. It will closely monitor the raw material position and further hike in prices would depend on the same.
Management aims to maintain operating margin in the range of 20-21% going forward. “While we believe A&P expenses will remain high to support volume growth, a reduction in operating overheads will help the company maintain margins in the 20-22% range,” Dolat Capital Markets said in a report.
In addition, Page has set a revenue target of $1 billion by FY26. Analysts at Dolat Capital believe that the children, women and athletics segments will be key growth drivers for the company in the long run.
So investors seem to be factoring in optimism. The stock is down about 5% from its 52-week high 46,737.70 were seen in April. So far this year, the shares of Page have climbed about 10 per cent, leaving behind the Nifty 500 index, which has fallen.
Analysts have cautioned that in view of the higher valuation multiple, the stock may find it difficult to see a sharp rally in the near future.
“Page Industries stock is trading at 65x its FY24 price-to-earnings, which is higher than its historical average of 58-59x. The stock is one of the costliest bets in the discretionary segment, which will lead to a significant rise in the stock from its current levels,” said Himanshu Nayyar, an analyst at Yes Securities (India) Ltd.
Cost pressure is also easing. Against this background, further price hikes need to be closely monitored.
If prices rise further, Parekh Jockeys does not expect customers to reduce business with Lux, Rupa or Dollar brands, but they can cut down on the number of units purchased. “A higher valuation as well as this could prevent the stock from seeing significant upside in the short term,” he added.