Buy Page Industries Ltd for the Target Rs. 57,500 by Motilal Oswal Financial Services Ltd
Strong volume growth with robust margin expansion
* Page Industries (PAGE) reported 11% YoY sales growth in 4QFY25 (est. 8%; 7% in 3QFY25) and ~9% volume growth (est. 6%; 5% in 3QFY25) to 49m units. Volume growth was driven by consistent efforts in product innovation, marketing and distribution. In our recent channel checks in the innerwear segment, we found positive trends for PAGE and men’s innerwear category in the last 60 days. Partial benefits were attributed to early Eid in 4Q (last year Eid was in 1QFY25). Growth was broad-based, with innerwear products slightly outperforming outerwear products.
* Product realization stood at INR223/piece, up 2% YoY, backed by premiumization and an increasing share of e-commerce. Secondary sales were slightly higher than primary sales during the quarter.
* GM expanded 490bp YoY to 60.9% (beat), supported by stable input costs. Thereby, EBITDA margin expanded by 490bp YoY to 21.4%. PAGE did not take price hikes in 4Q and does not expect any in the coming quarters. It expects an increase in IT costs for digitalization and marketing expenses in FY26. That said, management has maintained its EBITDA margin guidance of 19%-21% for FY26 despite achieving 21.5% in FY25. We model an EBITDA margin at the higher end of the guidance at ~22% for FY26-FY27.
* The Odisha plant is set to be operational by Jun’25, which will enhance PAGE’s capacity to meet rising demand and improve efficiency.
* Inventory optimization through the ARS system, new product launches, capacity expansion, and digitalization initiatives will support growth. Benign input costs and cost efficiencies are likely to offset higher marketing/digital spending, which will help PAGE sustain its margin going forward. We believe the valuation will remain rich but have comfort in both growth acceleration and margin expansion in FY26. We reiterate our BUY rating on the stock with a TP of INR57,500, premised on 65x P/E FY27E EPS.
Beat on volume growth; strong gross margin expansion
* Volume growth at ~9%: Sales grew ~11% YoY to INR10.9b (est. INR10.7b) in 4Q. Sales volume rose ~9% YoY (est. 6.1%, 4.7% in 3QFY25) to 49.2m pieces.
* Strong margin expansion: Gross margin expanded ~490bp YoY to 60.9% (est. 57.2%). Similarly, EBITDA margin expanded to 490bp YoY to 21.4% (est. 17.8%). The margin expansion was primarily led by stable input costs and improved operating efficiency. Employee expenses rose 8% YoY and other expenses increased 13% YoY.
* Beat on profitability: EBITDA grew 43% YoY to INR2.3b (est. INR1.9b). PBT grew 51% YoY to INR2.2b (est. INR1.6b). Adj. PAT was up 52% YoY at INR1.6b (est. INR1.2b).
* In FY25, net sales/EBITDA/APAT grew by 8%/24%/28%.
Highlights from the management commentary
* Consumer demand growth remained muted through most part of FY25, but encouraging signs of recovery emerged in the second half. Growth was more pronounced in Tier 2 and Tier 3 cities, outperforming metro and Tier 1 markets by ~4%.
* No price hikes were taken by company in 4Q. Management does not expect any price hikes in the coming quarters.
* Growth was broad-based, with innerwear products slightly outperforming outerwear products. PAGE has reduced its inventory days by 7 days and expects to reduce them by another 7-8 days. Management indicated that inventory days still continue to stay higher than the pre-Covid levels.
* Women’s innerwear segment is seeing robust growth, while the outerwear segment saw subdued growth as PAGE had higher inventory levels.
* Kids category growth is gradually improving.
* FY26 EBITDA margin guidance remains broadly unchanged at 19-21%.
Valuation and view
* We raise our EPS estimates for FY26 by 6% and FY27 by 4%
* While the management has maintained its EBITDA margin guidance of 19%-21% for FY26 despite achieving 21.5% in FY25, we model an EBITDA margin at the higher end of the guidance at ~22% for FY26-FY27 (there is still upside risk due to strong gross margin recovery). We estimate a CAGR of 14%/16%/16% in sales/EBITDA/PAT over FY25-27E.
* Inventory optimization through the ARS system, new product launches, capacity expansion, and digitalization initiatives will support growth, in our view. Benign input costs and cost efficiencies are likely to lead to a better margin print. We believe the valuation will remain rich but have comfort in both growth and margin in the near term. We reiterate our BUY rating on the stock with a TP of INR57,500, premised on 65x FY27E EPS.
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