IGI Logo

Green shoots in deman

In-line with estimates; input cost benefits accrual delayed

Page Industries (PAG IN) Q3 revenue was in line with our estimates while margin was 231bp lower than our estimates, led by gross margin. The company still sells higher cost inventory and is yet to realize benefits of lower input cost. This led to slight underperformance at the PAT level.

Demand starts to pick up in innerwear

Revenue grew 2.4% YoY to reach INR 12,288mn in Q3, led by volume growth of 4.6% YoY and a realization decline of 2.1% YoY. Although athleisure continues to decline the most in the portfolio, other categories saw volume growth. Demand in innerwear is yet to pick up meaningfully, although green shoots are visible.

EBITDA margin to reach 21.5% by FY26E   

EBITDA margin expanded 263bp YoY to 18.7%, led by lower employee and Other expenses. Gross margin declined 32bp YoY to 53.1%. EBITDA grew 19.1% YoY to INR 2,297mn. We expect EBITDA margin to improve gradually from FY25, led by lower input prices, completion of Auto Replenishment System (ARS) implementation and improving demand. We expect margin to reach 21.5% by FY26E.

Valuation: reiterate Buy with a TP of INR 46,304

Athleisure wear and women’s innerwear are strong opportunities despite near-term pressures. We believe it will derive robust operating leverage from the strong recall of its brand, Jockey. It is focused on strengthening its business model by focusing on inventory management and optimizing cost. We revise our estimates taking into consideration Q3 performance, which led to an EPS cut of 2.5% for FY24E and 4.4% for FY25E. We introduce FY26 estimates. We expect a sales CAGR of 9.7%, an EBITDA CAGR of 16.4% and an APAT CAGR of 17.0% during FY23-26E. We reiterate Buy with a DCF-based TP of INR 46,304 on 56.4x (from 64.6x FY25E) FY26E P/E.

Please refer disclaimer at Report
SEBI Registration number is INH000000933