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ICICI Securities
Page Industries (Add)
Target: ₹42,500
CMP: ₹40,707.05
Page delivered a good Q2 with 46 per cent y-o-y revenue growth (2-year CAGR 18 per cent). We reckon: there may be some benefit of pent-up demand – H1-FY22 revenues are lower by 1.5 per cent compared to H1-FY20; and GM contraction was contained (down only 70 bps y-o-y) despite higher RM inflation (GM contraction is a near-term risk).
We like efforts to find new avenues for growth – kids and athleisure range along with penetrating the rural markets. Focus also continues on expanding distribution and adding EBOs (across segments). We believe in 2020-30, volume growth will have to be the key driver of growth unlike 2010-20, where Page enjoyed good price/mix benefit (price increases should now be more calibrated). Distribution expansion – it added 54 EBOs in Q2 and now has 1,000+ EBOs in 350+ cities; 22,000 MBOs have been added this calendar year; re-iterated strong growth potential in rural, tier 3 and tier 4 cities and women and kids potential, 30-33 per cent of volumes is outsourced; intent is to go closer to the consumers (both in urban and rural). We cut our earnings estimates for FY22 by 3 per cent while we increase our earnings estimates for FY23E by 4 per cent; modelling revenue/EBITDA/PAT CAGR of 24 per cent/35 per cent/42 per cent over FY21-23. Key downside risks are underperformance of men’s innerwear and sharper-than-expected RM inflation.
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