Page Industries’ Q4FY20 results fall short of lofty expectations
Demand revival remains crucial to boost investors’ confidence, especially with valuations being pricey
Shares of inner-wear maker Page Industries 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, according to Bloomberg data.
Unfortunately, March quarter results do little to boost investor sentiment. The company’s revenue declined by 11% year-on-year (y-o-y) to ₹541 crore. While the covid-19-led disruption in March was expected to play spoilsport, the Street had estimated y-o-y revenue to be more or less flat at around ₹600 crore.
Volumes dropped by a sharp 18.7% last quarter. This comes on the back of a 2.8% decline in volume in the December quarter, pointing to a steady decline in performance for a while. Page has been having a challenging time to boost sales, owing to tepid consumer demand and stiff competition.
For the whole year FY20, revenue increased by 3% y-o-y. Naturally, subdued revenue performance in the March quarter weighed on overall profitability. In a press statement, Page said: “Lower absorption of costs invested in sales and marketing, and people and technology, contributed to the lower profit after tax." Net profit fell by a whopping 59% to ₹31 crore.
Of course, the lockdown would mean that the June quarter, too, will be rather difficult. Even so, the company said on a call with analysts that signs of sales demand are encouraging since the partial lifting of the lockdown in May. Investors can well expect financial year 2021 to be rough thanks to covid-related demand uncertainty. But there is some respite.
As Akhil Parekh, analyst at Elara Securities (India) Pvt. Ltd, said: “In FY21, the contribution from athleisure products for Page is likely to increase as more people stay at home. Given that athleisure products have slightly better margins compared to innerwear products, overall the changing mix should offer some support to Page’s profit margins this year." Althleisure refers to clothing designed to suit both for exercise and everyday wear.
Page is looking at curtailing some fixed and variable cost overheads. Even as these factors provide comfort, demand revival remains crucial to boost investor confidence, especially with valuations being pricey.
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