Strong b/s to aid in navigating tough market scenario...
Disruptions owing to the pandemic weighed significantly on the Q1FY21 performance as two-third of the quarter was a washout. Store closures, supply side challenges translated to volume de-growth of 69% YoY to ~15 million pieces in Q1FY21. Material presence in metro cities (~60%) further hampered operations due to stringent measures by local authorities. The management indicated that green shoots were visible with strong demand for outerwear segment (athleisure) post relaxation in lockdown. Subsequently, ASP grew 12% YoY in Q1FY21. Also, channel inventory has been on a declining trend indicating strong pent up demand (secondary sales higher by 18-20% than reported Q1FY21 number). Overall revenues for quarter de-grew 65.9% YoY to | 284.8 crore. Reported gross margins fell 696 bps YoY to 48.1% on the back of inventory provisioning of | 10.7 crore. Gross margins (including sub-contacting charges) were at 23% vs. 39% YoY owing to lower absorption of labour charges. Page significantly rationalised overheads with other expenses down 66.3% YoY to | 48.8 crore (mainly cut in marketing spends). Employee expenses de-grew 4.3% YoY to | 122.9 crore. Subsequently, it reported EBITDA, PAT loss of | 34.7 crore, | 39.6 crore, respectively (tax credit: | 12.8 crore). Page continues to have a healthy b/s that would enable it to tide over challenging scenario better than peers.
Demand recovery gaining pace; E-com share continues to rise
As on date, 96% of EBOs (742), 90% of large format stores (1928 stores) and 80% of multi branded outlets (54000+ touch points) are operational. The company is currently operating at 85% capacity utilisation. E-commerce channels have seen significant growth with both own website and outside e-com platform revenue share increasing. In the offline space, recovery in LFS has been sluggish owing to lower footfalls in malls. The management indicated healthy recovery especially in the athleisure segment from July. Also, primary sales in August have almost reached 100% of pre-Covid level YoY. If the demand trend sustains, the management expects growth in revenues from Q3FY21 onwards. Page is looking to maintain absolute fixed overheads below FY20 level for FY21 with curtailment in ad spends.
Valuation & Outlook
Despite operational losses in Q1FY21, liquidity position stayed healthy with cash & cash equivalents increasing 56% QoQ to | 173 crore led by optimisation of working capital (working capital reduced 10% YoY). Factoring in the performance of Q1FY21, we revise our earnings, revenue estimates downwards by 12%, 23%, respectively, in FY21E. Inherent strength of the brand, robust balance sheet and strong distribution network would enable Page to navigate through challenging times more swiftly than peers. We bake in earnings CAGR of 14% in FY20-22E and expect the company to generate RoCE of 54% in FY22E. We maintain HOLD rating on the stock with a revised target price of | 20950 (52.0x FY22E EPS, previous TP: | 21400).
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