28 May , 2021 By : Kanchan Joshi
MUMBAI : Page Industries Ltd’s shares trade at expensive valuations. Based on Bloomberg data, the stock’s price-to-earnings multiple stands at around 70 times estimated earnings for FY22. While high valuations may cap significant upsides, the innerwear maker’s strong March quarter results (Q4FY21) may well lend support to the stock in the foreseeable future.
Revenues increased by nearly 63% year-on-year to Rs881 crore; it is the second highest achieved in any quarter, according to the company. True, a favourable base helped, considering that revenues had declined by 11% in Q4FY20. Even so, performance is better than expected. The athleisure portfolio did well.
“For the first time since Q3FY19, Page has reported double-digit two-year average volume growth in Q4FY21," said analysts from Motilal Oswal Financial Services Ltd in a report on 27 May. Needless to say, investors would watch whether the pace sustains, going ahead. Motilal Oswal analysts point out, “While there seems to be a potential recovery to double-digit volume growth, it would still be below the nearly 30% sales CAGR seen over FY08-18." CAGR is compound annual growth rate.
Earnings before interest, tax, depreciation, and amortization (Ebitda) margin contracted by 510 basis points to 19.3%, disappointing some analysts. One basis point is one-hundredth of a percentage point. Sequential drop in margins is owing to an increase in staff costs and other expenses. Ebitda margin has expanded year-on-year helped by operating leverage.
As such, margin could well increase after the March quarter. “We believe Page will tinker with product pricing and ad-spends to maintain full-year Ebitda margin around the 21% mark," said analysts from Kotak Institutional Equities in a report on 28 May. Note that FY21 Ebitda margin stood at 18.6%.
To be sure, Page has put up a strong revenue show for the past two quarters. This has curtailed the year-on-year drop in FY21 revenues to just around 4%, which is commendable given that the first quarter was a washout. The second covid wave is expected to adversely impact near-term financials. “Success of Page’s new categories (such as kidswear) and entry into new geographical areas are key to near-term growth," said Kotak’s analysts.
Even so, investors are likely to focus on medium- to long-term growth prospects. Kotak has revised down FY22 revenue/earnings per share estimates by 1.5/3.5% respectively but has broadly retained its FY23 estimates.
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