Hold Page Industries; target of Rs 19000: ICICI Direct

ICICI Direct's research report on Page Industries

Page Industries reported one of its weakest performances, with results coming in below our estimates across all parameters. The revenue trajectory decelerated with Page reporting one of its lowest ever sales growth of –0.1% YoY to Rs 607.9 crore. Volumes for Q4FY19 remained constant YoY at 36.9 million pieces while realisations de-grew 1% YoY to Rs 161/piece. The management attributed the slowdown to subdued consumer demand and de-stocking of inventory by retailers post GST transition. On account of negative operating leverage, EBITDA margins declined sharply by 440 bps YoY to 19.7% (Q3FY19: 22.4%). Following the weak operational performance, PAT declined 20.4% YoY to Rs 75.0 crore.

Working capital cycle witnessed certain deterioration owing to a spike in inventory days (up by ~15 days to 96 days). Despite decline in operating cashflows, return ratios improved significantly, owing to high dividend pay-out in FY19 (Rs 344/share ~98% dividend pay-out ratio). The management highlighted that liquidity headwinds continued to impact the demand from retailers in Q1FY20. Factoring in the weak performance of FY19, we revise our earnings estimate downwards by ~16% for FY20E. We introduce FY21 estimates and build in revenues and PAT CAGR of 12% and 15%, respectively, in FY19-21E. Deceleration in revenue growth is a concern and makes us accord a lower target multiple. We reiterate our HOLD rating on the stock, with a revised target price of Rs 19000 (41.0x FY21E EPS).

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