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We maintain ADD on PAG, with an unchanged TP of Rs46,800 (50x Jun-28E EPS). Despite a 10-11% EBITDA miss in 1Q (vs our/street expectations), we maintain our earnings estimates, as the 1Q miss was largely due to the spreading of trade schemes across quarters and logistical delays in order fulfilment toward the end of 1Q. PAG reported a weak 1Q, with 8% revenue growth and flat EBITDA. However, underlying demand trends (tertiary sales at EBOs/secondary sales at distributors) remain healthy, and it expects to fully recover the lost volumes in 2Q. With healthy traction in the new athleisure range (JKY Groove/Studio), PAG remains confident of delivering double-digit volume growth in FY27. While key RMs continue to see volatility, PAG maintained its EBITDA margin band of 19-21%, led by strategic price hikes, premiumization, and cost controls. We expect PAG’s realization to improve by ~4% in FY27, aided by the partial benefit of ~5% price hike (in 2 tranches) and premiumization. We believe it is well positioned to transition toward a mid-teen growth phase, supported by the alignment of ‘demand-side’ tailwinds (market consolidation) with ‘supply-side’ initiatives such as distribution expansion, consumer activations, premium products (Groove/Studio/Bonded Tech), and removal of the ARS impact. PAG has corrected ~15% from its recent highs and assuring commentary on double-digit growth should drive a re-rating.

Retains double digit volume growth outlook, despite 1Q miss

PAG’s topline growth moderated to ~8% yoy in 1Q (vs 14% in 4Q; ~5% miss to our estimate), impacted by temporary logistics and manpower constraints toward the end of 1Q, which resulted in ~3 days of revenue being deferred to 2Q. Growth was also impacted by the structural change in trade schemes, which are now aimed at growth distribution across quarters (vs 1Q-heavy earlier). While volume growth was lower at ~6% in 1Q, PAG remained confident of delivering double-digit volume growth in FY27. It also expects realization-led growth to improve, aided by the partial benefit of ~5% price hike (in 2 tranches) and premiumization. RM inflation impacted gross margin (GM) by ~190bps yoy to 57.2%, but PAG expects GM normalization following the ~2% price hike taken in midMay. EBITDA margin declined by ~200bps, largely due to the GM decline. However, EBITDA margin at 20.3% remained within the guided range of 19-21%.

Athleisure a key focus area; EBO additions remain robust

Premiumization remains a key growth lever, with product upgrades and enhanced newness in the athleisure segment (JKY Groove/Studio). Athleisure is a key focus area and is being backed by the highest marketing investments across its portfolio. JKY Groove continues to gain healthy traction, with the recent season launched across ~500 EBOs and key online channels. PAG has also entered the character merchandise space through collaborations with Disney and Marvel, with a focus on more such collaborations in the future. Following robust MBO additions in 2HFY26 (~5,000 additions), distribution expansion moderated in 1Q, with ~440 closures. However, EBO expansion remained robust, with 25 additions in 1Q, taking the EBO count to 1,604.

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