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Volume growth tapers down on high base…

About the stock: Page Industries is the exclusive licensee of Jockey international brand and is the market leader in premium innerwear and leisurewear category. The brand is distributed in 2,895+ cities & towns and available in 118123+ MBOs and 1191+ EBOs. Sold ~ 190 million pieces in FY22.

* Strong backward integration facilities having capacity of 260 million pieces

* Robust business model generating 66%+ RoCE, delivering consistent EBITDA margins of 20%+ and having debt free b/s.

Q2FY23 Results: Page reported a subdued operational performance wherein revenues were in line with our estimates (mainly driven by realisations) while higher than expected investments in opex led margins to come in a tad below Page’s guided band of 20-22% (19%)

* Revenue for the quarter grew 16% YoY to | 1255.0 crore. Growth was mainly realisation led, which increased 15% YoY to | 220/piece. Volume grew merely by 1% YoY to 57.2 million pieces as previous quarter had healthy volumes of mask. Excluding the same, volumes in core category grew 7% YoY

* Page accelerated spends towards marketing expenses and manpower cost (building capacity). Subsequently, EBITDA margins declined 258 bps YoY to 19.0%. Ensuing PAT grew 1% YoY to | 162.1 crore

What should investors do? Page’s share price has grown ~2.0x in past five years

* We maintain HOLD recommendation on the stock

Target Price and Valuation: We value Page at | 51770 i.e. 66x FY24E EPS

Key triggers for future price performance:

* New initiatives (focus on kids wear segment, new launches in athleisure/women wear and thrust on increasing penetration in rural areas) to propel sales and earnings growth

* Significantly accelerated its distribution touchpoints (added 32548 outlets in FY22) to 118123+ MBOs and 1191+ EBO stores

* To further penetrate the untapped markets of tier III/IV cities, it has launched a bouquet of products catering to these markets
* Expects to sustain healthy revenue trajectory. The company aims to reach sales of US$1 billion by FY26 (CAGR: ~18%)

* We build in revenue, earning CAGR of 24%, 27%, respectively, in FY22-24E

Alternate Stock Idea: Apart from Page, in our retail coverage we also like Aditya Birla Fashion & Retail (ABFRL).

* ABFRL has charted out growth strategies to become a ~US$2.8 billion entity (| 21000 crore) by FY26E, translating to 15% CAGR in FY20-26E

* BUY with target price of | 380/share

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