Page Industries slips 8% on disappointing December quarter results

Shares of inner wear maker Page Industries slipped 8 per cent to Rs 21,650 on the BSE on Friday after the company reported a sharp 500 basis points decline in operating profit margins in December quarter (Q3FY20), due to higher expenses.

Page Industries is engaged in the manufacturing, distribution, and marketing of innerwear athleisure sleepwear and swimwear for men, women, and kids. It is the exclusive licensee of Jockey International for manufacture, distribution, and marketing of the JOCKEY brand in India.

In Q3FY20, the earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined to 17 per cent from 22 per cent in Q3FY19. Net profit was down by 14.6 per cent year-on-year (YoY) at Rs 87 crore against Rs 102 crore in the corresponding quarter of previous fiscal.

The company said that a temporary dip in profit after tax was entirely due to enhanced investment in sales and marketing, people, and technology. Its revenue grew by 7.5 per cent at Rs 793.8 crore on YoY basis.

For ensuring high growth over the next few years, the management said the company will continue to make investments and spend in sales and marketing, particularly at the point‐of‐sale such as display fixtures. It will also continue its aggressive expansion plans of new Exclusive Brand Outlets. 

While macro challenges persist, given the robust financial strength of the company, the management believes that the company can comfortably make these investments for the future, albeit in a calibrated manner.

Page Industries company exhibited worst volume performance with 2.8 per cent de-growth compared to 12.1 per cent/9.1 per cent growth reported in Q3FY19/Q2FY20.

Going ahead, analysts at Dolat Capital believe that the new product launches in men, women and kid’s category and impetus to increase penetration especially in kid’s category, will potentially help the company gain market share. The revival in domestic demand is a key for volume growth.

“We believe that the base would become favorable here on. In addition, improvement in volumes would result in improvement in operating leverage,” the brokerage firm said in result update.

“Page Industries is working on fabric innovation and product launches in addition to the ramp-up in distribution reach, which currently stands at 63k MBOs and 720 EBOs. The management plans to double the current installed capacity of 260mn pieces in the next 4-5 years. It seemed to lack confidence on getting back to normalised growth of midteens or 21 per cent margins in the near-term which might drive a cut in both earnings and multiple for the stock,” analysts at Systematix Shares and Stocks (India) said in result update.

At 09:51 am, Page Industries was trading 7 per cent lower at Rs 21,810, as compared to 0.33 per cent rise in the S&P BSE Sensex. A combined 90,945 shares have changed hands on the counter on the NSE and BSE so far.

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