Analyst Concall
Page Ind retains EBITDA margin guidance of 19-21% for FY25
This story was originally published at 22:39 IST on 7 November 2024
Register to read our real-time news.Informist, Thursday, Nov. 7, 2024
Please click here to read all liners published on this story
--Page Ind: Secondary channels performing better than primary
--CONTEXT: Page Industries senior management's comments from analyst concall
--Page Ind: Inventory levels in athleisure category higher than co's aim
--Page Ind: No price increases were taken in Jul-Sept
--Page Ind: Premiumisation trends helped improve product mix for co
--Page Ind: E-commerce, high-value categories also improving product mix
--Page Ind: Would wait few months to say growth momentum can sustain
--Page Ind: Expect subcontracting costs to remain at 1-2% of sales
--Page Ind: Continuing efforts to reduce staff costs
--Page Ind: Men's business segment stronger for co than women's
--Page Ind: Will focus on kids' portfolio along with women's segment
--Page Ind: Athleisure remains promising category, will continue to back it
--Page Ind: Consumer demand positive in athleisure
--Page Ind: Aim to sustain exclusive brand store addition rate of 150-160 FY25
--Page Ind: Have enough new products in the pipeline for FY25, FY26
--Page Ind: All retail metrics beyond walk-ins healthy for exclusive stores
--Page Ind: Saw growth in basket size, transaction cost for walk-in customers
--Page Ind: Expect operating margin to remain near 19-21% range FY25
--Page Ind: Continue to spend 4-5% of sales on marketing
--Page Ind: Labour, raw material costs seen stable FY25 but IT cost may rise
--Page Ind: Working capital days at 61 in Jul-Sept vs 75 days end of FY24
--Page Ind: Strategic focus to continue on metro, tier-2, tier-3 cities
--Page Ind: E-commerce channel segment saw 41% growth in Apr-Sept
--Page Ind: Inventory levels lower than those at start of FY25
By Steffy Maria Paul and Apoorva Choubey
MUMBAI – Page Industries Ltd. expects operating margins to trend in the guided range of 19-21% for the financial year 2024-25 (Apr-Mar), as stable operating costs and strong traction in premium product categories are likely to limit the impact of a muted consumer demand environment and higher technology spending. The company, which manufactures and sells the Jockey and Speedo brands in India, refrained from giving definitive guidance on overall growth, warning that consumer sentiments have not recovered fully.
The company's earnings before interest, tax, depreciation, and amortisation margin for the September quarter rose 210 basis points on year to 22.6%. The profitability for the quarter was underpinned by stable raw material costs, improvement in product mix, sustained higher sewing efficiency, and controlled employee and operating costs, the senior management told analysts at a conference call.
As has been pointed out by other consumer product companies, Page Industries highlighted that consumer sentiment in India is not back to normal or where the company would like it to be. The management said it would wait before commenting on the company's ability to sustain the growth momentum it saw in the quarter. "...we would love to have double-digit growth and even more, but this is the first quarter where we have seen decent growth, and we would like to see a few more months before we really can confidently say that...," the management said.
Page Industries reported a revenue of INR 12.46 billion for the September quarter, up over 11% on year. This is the highest on-year growth in revenue for the company in the last two years. The company reported a net profit of INR 1.95 billion for the quarter, up almost 30% on year.
The company's total expenses for the quarter were INR 9.98 billion, up 7.7% on year. Talking about its expenses, the company said that while it expects spending on employee benefits and raw materials to remain stable going ahead, it expects spending on information technology to rise. The company added that it will continue to work towards reducing its labour cost. The company expects its subcontracting costs to remain at 1-2% of sales, and its marketing expenses to be 4-5% of revenue.
INVENTORY LEVELS
The company said it had 68 days of inventory as of Sept. 30, against 93 days at the end of FY24. About its channel inventory, the company said it currently has 40 days of inventory at the distributor level, an improvement of about three days from the level at the beginning of FY25.
A focus on healthier inventories in the distribution network helped the company improve the level, it said, and added that it expects to achieve an optimum inventory level at the level of channels by the end of FY25 by reducing another couple of days.
"Secondary sales have been higher than primary sales for almost two quarters now," the management said. "So our inventory levels were higher than what they should have been as we started the year, and it has been a conscious attempt to bring inventory levels at the distributor to normal levels. There is no intention to inflate or fill channels with more inventory than required." The company said its inventory level for the athleisure category remains higher than what it would like it to be.
Page Industries' working capital days for the September quarter were 61, down from 75 days at the end of FY24.
CATEGORIES
The company said its e-commerce channel saw 41% growth in Apr-Sept. In a post-earnings investor presentation, it said the e-commerce channel continues to grow at a higher rate than the brand average, with quick commerce contributing to the growth. While the company did not raise prices in the reporting quarter, premiumisation, given consumers' willingness to go for higher-priced products, and increased e-commerce sales helped to improve the product mix.
In terms of consumer penetration, the company said its men's business category was stronger than the women's business, where it sees higher competition. The company has invested in the women's category to cater to all requirements, which was not the case a few years ago. Talking of consolidating the children's categories with women's wear, the company said doing so would help it increase the market reach of both categories.
Page Industries said that while consumer sentiments are still muted, all retail metrics beyond walk-ins have been strong for its exclusive brand outlets. The company said the basket size and transaction value for walk-in customers also saw considerable growth.
The athleisure category grew at abnormal levels during the COVID-19 pandemic but is being normalised now, the management said. However, Page Industries will back the category, which it sees as a promising one, to grow in a sustained manner. The company added that consumer demand for the category has been positive.
PRODUCT LAUNCHES
The company said it has launched products in the work-leisure and Jockey Life categories in the past year which have received good consumer feedback. Its product pipeline for FY25 and FY26 was "pretty full", the management said. The company aims to add 150-160 exclusive branded outlets in the current year, just as it did in the past few years.
Page Industries said it will focus its attention on metro cities, and tier-2 and tier-3 towns. In the general trade channel, tier-3 and tier-4 towns continued to grow faster than the brand average, it said.
On Thursday, shares of Page Industries closed at INR 45,064.10 on the National Stock Exchange, up 2.1%. End
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
