Add Page Industries Ltd For Target Rs.52,000 - ICICI Securities
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Momentum intact albeit on an adjusted basis
Page had a softer-than-expected print with revenue growth of 16% YoY (1% volume growth). Management’s clarification that core (excluding masks) sales grew 20% with 7% volume growth did help but we would have appreciated this clarity last year itself. EBITDA margin of 19.0% was also lower than the (annual) guided range of 20-21%. We like efforts to find new avenues for growth – kids (model still being fine-tuned) and athleisure range along with penetrating the rural markets. Besides, our checks suggest good demand traction for women innerwear. Focus also continues on expanding distribution (across segments / channels).
From a medium-to-long term perspective, we believe Page does have (operating) margin expansion potential with Page’s EBITDA margins having remained in the narrow range of 18-21% for the last 10+ years. We believe Page has front-ended investments in new avenues. Maintain ADD; TP Rs52,000.
* Decent adjusted performance but soft on overall basis: Revenues were up 16% YoY but down 6% QoQ to Rs12.6bn. It highlighted, (1) volume growth was 1% (on overall basis), (2) volume growth ex of masks came in at 7%, translating to LFL revenue growth of 20%. It highlighted good gains from (a) strengthened supply chain (product availability) and (2) distribution expansion along with a broad-based (segmental) performance. We note that it is also integrating channels of women and kids range to drive (growth) synergies.
* Continued investments in a soft quarter leads to lower margin: Gross margin (on underlying basis) came in at 39.6% (40.0% in 2QFY22). EBITDA margin came in at 19% (down 260bps YoY). While there is some softening in RM prices, Page is keen to increase investments – management is still guiding for EBITDA margins to stay in the range of 20-21%. We note that staff costs have increased at 20% on 3- year CAGR basis. It has highlighted some recruitment at senior level as well. Besides investing in segments of women innerwear and kids, Page is also investing in deepening its presence.
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