Page Industries: Losing grip

Shares of Jockey inner-wear maker Page Industries rallied 10% to Rs 21,086 on the BSE on Wednesday despite the company reporting a disappointing set of numbers for the quarter ended March 2020 (Q4FY20).

However, the shares were almost 30% lower compared to its January highs. Still, its valuations are far from being cheap. The stock trades at 42 times estimated earnings for financial year 2022.

For quarter ended to March 31, the company’s revenue slipped 11% on year (y-o-y) at Rs 541 crore, owing mainly to volumes declining 18.7% to 30 million pieces.

Sharp volume impact in March was the result of retail outlets being temporarily shut on account of the nation-wide lockdown due to the Covid-19 outbreak.

The company’s profit after tax (PAT) declined 58.6% y-o-y to Rs 31 crore during the quarter. The lower absorption of costs invested in sales and marketing, people and technology contributed to the lower PAT.

Owing to negative operating leverage, EBITDA (earnings before interest, taxes, depreciation and amortization) margins contracted sharply by 900 bps y-o-y to 10.7% from 19.7% in the year-ago quarter.

Despite of the challenging financial year 2019-20 (FY20), the company generated healthy cash flow from operation worth Rs 517 crore, up 125% over FY19. It continues to be virtually debt free having cash balance worth Rs 117 crore as on FY20.

For the whole year FY20, revenue increased by 3% y-o-y. Naturally, subdued revenue performance in the March quarter weighed on overall profitability.

Going ahead Page is looking at curtailing some fixed and variable cost overheads. As on date, 89% of EBOs (677) and 64% of large format stores touch points are operational. The company is currently operating at 85% capacity utilisation. Early trends indicate a surge in demand for athleisure segment wherein its share increased 7% (~30% of sales).

Despite a competitive market Page has generated healthy operating cash flows of around Rs 500 crs and to almost debt free with cash balance worth Rs 117 crore as on FY20.

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