Had it been a matter of just one quarter, investors of Page Industries Ltd would have taken the disappointing June quarter results in their stride. Covid-19 pandemic disruptions had plagued everyone.

Last quarter, the company reported a loss of almost Rs35 crore at the earnings before interest, tax, depreciation, amortization (Ebitda) level. While the worst may be over, investors of the innerwear maker have to worry about uncertainty on future growth revival.

Page did say in its post results earnings call on Thursday that August sales are almost near levels from the same period last year. But that’s not very comforting. As analysts from Motilal Oswal Financial Services Ltd said, “There is no indication that the company, which has reported flattish earnings per share over the past two years, has turned the corner on the path to topline and earnings growth.”

Add to this, Page’s shares trade at expensive valuations. Bloomberg data shows that the stock trades at about 48 times estimated financial year 2022 earnings.

For the June quarter, revenues declined sharply by as much as 66% year-on-year to about Rs285 crore, coming in lower than Street estimates. The full impact of the covid-19 lockdown last quarter reflects in the sales volumes drop of 69%, which dragged down revenues. Even so, average selling price (ASP) improved helped by better performance of the athleisure segment.

Still, better ASPs didn’t move the needle materially. The bigger disappointment was the contraction of nearly 700 basis points in gross profit margin to 48.1%. One basis point is one-hundredth of a percentage point. Lower absorption of factory overheads spoiled the show on profitability. Further, a slower pace of decline in employee expenses drove the Ebitda loss.

Since the June quarter results were announced, Page’s shares have declined by about 5%. Page has said as of now, more than 80% of its multi-brand outlets and 90% of large format stores are fully functional. In keeping with the pandemic times, the company has seen substantial growth in e-commerce.

Going ahead, the pace of recovery remains uncertain. “Although Page seems to be relatively better placed due to work-from-home–led demand for its athleisure products, given the significant deceleration in growth over FY19-20, we await more clarity on recovery trends,” said Emkay Global Financial Services Ltd’s analysts in a report on 3 September.

Motilal Oswal analysts point out, “Category slowdown and competitive headwinds present other significant near-term challenges.” Given the backdrop, it’s not surprising that the stock is still about 30% away from its pre-covid highs seen in January on the NSE.

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