Jockey exclusive licensee Page Industries slips 11% after weak Q4 numbers

Page Industries shares slipped over 11 percent in the morning trade on May 26, a day after the company posted a dull performance in the quarter ended March. It reported a 59 percent YoY decline in net profit at Rs 78.4 crore in the March quarter of FY23. Sequentially the net profit declined 37 percent from Rs 124 crore reported in the December quarter.

The company that manufactures and markets products under brands, Jockey and Speedo, clocked revenue from operations at Rs 969.09 crore, down 12.8 per cent in comparison to Rs 1,111.11 crore in the fourth quarter of FY22.

A challenging economic scenario and a general decrease in consumption affected profitability, with the EBITDA margin contracting to 13.9 percent in the reporting quarter from 24 percent a year-ago. ICICI Securities explained margins shrunk sharply mainly due to lower absorption of factory overheads, higher advertising and promotion (A&P) and manpower costs

Morgan Stanley believes that Q4 numbers were weaker than management expectations and missed consensus.

At 10:36 am Page Industries’ stock traded 11.44 percent lower at Rs 36,415 apiece on the NSE. The stock has given negative returns of 1.56 percent over a 12-month period, while it fell 2 percent on a year-to-date basis.

What’s concerning for analysts:
The company’s sombre performance in the fourth quarter drove most brokerage firms to have a negative outlook on the company’s stock.
Kotak Institutional Equities has a “sell” rating on the stock with a cut in fair value to Rs 33,000 from Rs 35,000. It said the fall in revenue was due to lower-than-expected volumes. Volumes declined 14 percent YoY driven by subdued demand and mismatch in primary and secondary sales due to auto replenishment system (ARS) implementation. The brokerage firm has also cut earnings per share (EPS) estimate for FY24-25 by 20-24 percent owing to this weak demand environment.

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Meanwhile, Nuvama Institutional Equities has downgraded rating on shares of Page Industries to “Reduce” from “Hold” on the back of a weak market environment and ARS implementation, with a revised target price of Rs 36,800. Even ICICI Securities has downgraded its recommendation on the stock from Rs 43,500 with cut in target price to Rs 41,000 on the back of general revenue growth slowdown and negative operating leverage. It has also trimmed its earnings estimate by 16 percent for FY24-25.
The domestic brokerage firm sees underperformance of men’s innerwear and sharper-than-expected raw material inflation as key downside risks.

Meanwhile, Axis Securities maintains a “Hold” rating on the stock with a cut target price to Rs 40,000 from Rs 41500. It likes the management’s undeterred focus on distribution expansion across channels and smaller towns, coupled with a strong stance on the implementation of ARS across its retail network despite near-term volume pressure. “It will make PAGE more agile and stronger than the competition in the long run.”
On the other hand, Morgan Stanley is overweight on Page Industries with a target price of Rs 43,068. It sees weak revenue growth in the next two quarters, however margin recovery would be able to drive revenue growth in the long run, the foreign brokerage firm quickly added.

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