Page Industries dips 6%, hits over two-year low after another slow quarter

Shares of Page Industries hit an over two-year low of Rs 17,438, down 6 per cent intra-day on the BSE on Friday, after the company reported drop in net profit for the second quarter in a row, due to lower volume growth during April-June quarter (Q1FY20). The stock was trading at its lowest level since February 6, 2018.

Page Industries, the maker of Jockey garments, reported 10 per cent year-on-year (YoY) decline in net profit at Rs 111 crore in Q1FY20, while net sales grew 2.4 per cent YoY to Rs 835 crore over the previous year's quarter. EBITDA (earnings before interest, taxes, depreciation, and amortization) margin contracted 90bps to 22.4 per cent from 23.2 per cent in the year-ago quarter.

Analysts attribute the company's poor performance during the quarter to slowdown in the economy and low footfalls in EBO’s (exclusive brand outlet). Jockey’s volume decline was across the categories. The volume pressure was mainly due to less number of footfalls across channels.

“Going ahead, analysts at Dolat Capital believe that slowdown in the economy would restrict the company’s performance in the near term. Nevertheless, new product launches in men, women and kid’s category and impetus to increase penetration especially in kid’s category would help the company to register double digit growth in H2FY20E”, the brokerage firm said in result update.

“Page has reported 2.4 per cent volume de-growth during the quarter. The volume slowdown in the innerwear industry is during July 2019 as well. Nevertheless, we believe that with aggressive expansion plans (to double the store count over next few years), increase in distribution reach and capacity additions would help enhance volume growth for Page. Further, ongoing efforts to launch new products in kid’s category would help accelerate overall volume performance,” it said.

“However, with return ratios and free cash flow (FCF) generation holding-up well, we expect the stock to recover to its long-term average earnings multiple of 50x eventually, though after some more correction from current levels. The stock should find takers at lower levels given the strong return ratios led by increased outsourcing, Page Industries’ dominant position and retail reach and the massive growth opportunity in its target market,” analysts at Systematix Shares and Stocks (India) said in result update.

Thus far in the calendar year 2019, Page Industries has underperformed the market by falling 31 per cent, as compared to 4 per cent rise in the S&P BSE Sensex.

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