Page Industries turn the page

KS Badri Narayanan Chennai | Updated on November 25, 2020 Published on November 25, 2020

Stock recovers 18% since Norges Bank’s ‘human rights’ charge

The stock of Page Industries, manufacturer of Jockey innerwear, has gained 18 per cent since Norges Bank Investment Management, Norway’s $1-trillion wealth fund, on August 31 said that it is excluding Page Industries from its portfolio for alleged human rights violations.

Betting on new initiatives

According to analysts, the clarification, which followed the allegations of violation of labour practices, and its recent business transformation initiatives are pulling investors towards the stock.

The company got its facility audited by WRAP USA, which certifies socially responsible factories in the sewn-products sector, and is expecting a compliance certificate soon.

‘Limited upside’

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Brokerages, however, see only a limited upside for the stock and they are awaiting further confirmation on the performance before upgrading it.

After the Norges Bank announcement, the stock tumbled to a low of ₹18,857, but since then recovered steadily to hit a three-month high of ₹22,640 on November 17.

Shares of Page Industries on Wednesday tumbled 2.33 per cent to ₹22,084.05 on the BSE. The stock had hit a 52-week high of ₹26,882 in February, while the all-time peak was registered at ₹36,370 on August 31, 2018.

Page’s sales recovery of nearly 95 per cent in Q2 with double-digit growth in September 2020 and improving trajectory in October are among the fastest in discretionary companies, said ICICI Securities.

Re-rating soon?

More importantly, ICICI Securities likes the continued focus on business transformation initiatives such as implementation of auto replenishment system, assortment planner tool (helps in product-mix improvement), working on production planning tools and structural cost saving measures.

Also read: Page Industries crashes 10% as Q4 numbers disappoint

The stock is currently trading at 47x FY23 earnings and is expected to see some upgrades now after exhibiting a positive growth outlook after more than two years, said YES Securities.

“With manufacturing excellence, pricing power and margins never in question, it looks like that the business transformation initiatives have started bearing results and now the long-awaited growth phase seems to be coming back, which should bring in a phase of multiple re-rating for the stock over the next few quarters,” it said.

Stronger recovery, margin gains and favourable outcome in the probe into human rights violations are key positives, said Emkay Global. “However, we await more triggers for Page Industries to return to consistent mid-teen growth,” it added.

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Published on November 25, 2020
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