Page Industries Q3 Results Review - Demand, Inventory Headwinds Delaying Recovery: Systematix

Systematix Report

Page Industries Ltd.'s delivered a mixed performance with growth getting back to positive territory but margins getting impacted due to lower realizations, inferior mix and higher digital transformation and marketing spends.

Despite a muted demand environment, the company reported 2.4% YoY growth in revenue and 4.6% growth in volumes.

Margin saw a 263 basis points YoY improvement to 18.7% from a low base led by strong cost controls, low employee cost and lower fabric costs while profit after tax grew 23.1% YoY on the back better margin and higher other income.

Despite near-term demand softness which is making the company run a tight ship on costs, it still intends to increase essential spends on marketing, distribution esp D2C and exclusive brand outlets and product innovation, given still low penetration rates across segments and markets. Soft raw material prices should also drive some volume and margin recovery as there is no imminent need of a price hike.

Inventory health and return on investments of channel partners should improve significantly in FY25 helping control distributor attrition. We continue to believe in the long-term growth potential of the business and do not think the structural moats have been impacted.

Given the near-term growth and competition headwinds, we trim our FY25 revenue/PAT estimates by 3%/8% and now build in revenue/PAT compound annual growth rate of 10%/15% over FY23E-26E.

We maintain our 'Hold' rating with a target price of Rs 39,240 (Rs 38,700 earlier) based on 50 times FY26E earnings, a 20% discount to Page Industries’ long-term valuation multiple, given the currently sluggish demand environment and still high inventory levels.

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