Page Industries, the exclusive licensee of renowned brands Jockey and Speedo, witnessed a substantial decline in its stock value following disappointing financial results for the fourth quarter. The company experienced a 59% year-on-year drop in net profit and a 12.8% decrease in revenue from operations.
Challenging economic conditions and a decline in consumption were cited as the primary factors behind the company’s underperformance. As a result, Page Industries’ shares tumbled over 11% in morning trade on May 26, prompting negative ratings from various brokerages. This article delves into the details of the company’s lacklustre performance and the implications it carries.
Substantial Decline in Financial Performance:
Page Industries reported a significant decline in net profit, which plummeted by 59% year-on-year to Rs 78.4 crore in the fourth quarter of the financial year 2022-23. Sequentially, net profit witnessed a decline of 37% compared to the previous quarter. The company’s revenue from operations also slumped by 12.8% to Rs 969.09 crore during the same period.
Impact of Challenging Economic Scenario:
The weak financial performance of Page Industries was largely attributed to the challenging economic conditions prevailing during the reporting period. The company faced adverse effects stemming from a decrease in consumption, leading to a decline in demand for its products. These factors negatively impacted the company’s profitability and revenue growth.
Operational Challenges and Lower Capacity Utilisation:
Page Industries’ EBITDA (earnings before interest, tax, depreciation, and amortisation) witnessed a significant degrowth of 50%, falling to Rs 134 crore in the fourth quarter of the fiscal year. The EBITDA margin declined from 24% in the previous year to 13.9% in the reporting quarter. The company cited higher inventory levels acquired during an inflationary period and lower-than-optimal capacity utilisation as key factors contributing to the decline in profitability.
Dividend Payout and Future Outlook:
Despite the disappointing financial results, Page Industries announced its fourth interim dividend of Rs 60 per equity share for FY23. The company aims to address the challenges it faced by taking appropriate measures to optimise inventory levels and improve capacity utilisation. However, brokerages remain sceptical about the company’s future prospects, with negative ratings and lowered target prices.
Brokerage Views:
Morgan Stanley, although overweight on Page Industries, expressed concerns regarding the weaker-than-expected Q4 performance. The firm anticipates weak revenue growth for the next two quarters but believes that margin recovery could drive future revenue growth. On the other hand, Kotak Institutional Equities assigned a “sell” rating to the stock, citing lower-than-expected volumes and a weak demand environment. Nuvama Institutional Equities downgraded Page Industries from “Hold” to “Reduce,” considering the weak market environment and the implementation of the ARS system.
Page Industries, the exclusive licensee of Jockey and Speedo brands, faced a setback as weak Q4 financial results caused its stock value to plummet. The company’s profitability and revenue were severely affected by challenging economic conditions and declining consumption. Although Page Industries announced measures to address the issues, negative ratings and lowered target prices from various brokerages reflect concerns about the company’s future growth prospects. Investors and market observers will closely monitor the company’s strategies to overcome these challenges and restore profitability in the coming quarters.
