Page Industries stock hits new 52-week low on subdued Q3 result, outlook

Ebitda margin at 15.8%, slid 230 basis points (bps) year-on-year in Q3. One basis point is 0.01%. The company’s Ebitda margin was anticipated to be under pressure, but the compression is much steeper. Consequently, the reported net profit at Rs123.7 crore, fell 29% y-o-y and was much behind consensus estimate of Rs168.6 crore.

Shares of the company fell to a new 52-week low of Rs37,170 on the NSE in Friday’s early trade.

In an earnings call, the management said that margin was adversely impacted by high-cost inventory and lower absorption of factory overheads. According to the management, most of the high-cost inventory is consumed and the benefits of low-cost inventory will flow through from Q4FY23 onwards. 

Note that the company is not planning to take price hikes for now. More importantly, the management feels that margins may have largely bottomed out. However, the movement in margin will also depend on growth.

Speaking of growth, volume declined 11% y-o-y and 7% sequentially in Q3FY23 to 52.8 million, the management said. The demand was lukewarm in Q3 as the market was not as buoyant as expected by the management. The management expects it to recover by Q1FY24. Further, competitive intensity has increased after the covid pandemic with many companies having entered the athleisure category.

Poor performance along with a bleak near-term outlook, has prompted an earnings cut.

Q3 Ebitda margin was the lowest in a non-Covid-hit quarter for over a decade, pointed out analysts at Motilal Oswal Financial Services. Also, sales were flat after eight consecutive quarters of double-digit growth. So, the brokerage house has reduced the company’s earnings per share (EPS) estimates by around 13% for FY23 and FY24.

Similarly, analysts at Kotak Institutional Equities reckon that company’s revenue growth may remain muted in Q4FY23 on challenging demand environment and no incremental support from price hikes. Remember, the company took large price hikes in Q4FY22 and H1FY23.

That’s not all. The company’s rich valuation multiple of around 55x FY24 PE is also a source of discomfort.