Page Industries reports pick up in demand after lockdown relaxation

Page Industries, which exclusively manufactures and sells the Jockey brand of innerwear in India, is the latest one to join a slew of companies reporting a pick up in demand after the relaxation of lockdown norms in various parts of the country. In an analyst call after the quarterly results, the company’s management said that the work from home code amid the nationwide lockdown that began on March 24, has resulted in a higher demand for leisure wear. Sales in some of its stores have touched the pre-lockdown levels.

The company expects the business to normalise in the next two-three quarters. The stock gained 9.2% on Wednesday following the encouraging commentary.

Lower competitive intensity is another positive factor. Peers including Arvind which were potential threats to Jockey are now struggling with rising working capital need and high inventory as a fallout of the lockdown. Arvind owns US Polo, a close rival to Jockey. On the other hand, Page plans to utilise its strong balance sheet to take advantage of weakening competition by winning market share.

The company said that its 680 out of the 750 exclusive brand outlets (EBOs) were now operational. While EBOs are taking time to function at the pre-lockdown level, the share of e-commerce sales has reached double digits from around 4% in FY20.

The company’s revenue fell by 11% year-on-year to Rs 540 crore while net profit dropped by 58% to Rs 31 crore in the March quarter. Sales volume fell by 19% though average realisation improved by 10%.

In the near term, the stock is expected to remain range bound until a clear visibility on demand turnaround. The company’s earnings grew by 30% annually between FY08 and FY18. Assuming a conservative growth rate of 15% for the current and the next fiscal, the stock’s price-earnings multiple works out to be 50 at Wednesday’s closing price of Rs 20,930. Whether it would be able to sustain the valuation depends upon how quickly the company reports a turnaround.