Why Page Industries Stock is falling – Q3FY2018-19 Result Analysis

Page Industries, also known as Jockey India, is a publicly listed company which is the licensee of Jockey International and Speedo in India and Sri Lanka.

The Q3FY18-19 results were released/declared on 14th February 2019. After the result, the stock is down by 15%-20%.

Page Industries – Q3FY18-19 Result

  • Sales – The QoQ growth in sales is of 6.8% and the YoY growth is close to 19%. Analysts are saying that the actual YoY growth is of 14% but as the company has changed its accounting standards, its growth has become 19%.
  • Operating Profit – The QoQ growth in operating profit is almost 15% and the YoY growth is of 25%.
  • Net Profit – The QoQ growth in sales is of 9.6% and the YoY growth is close to 19%.

Recent Problems with the Page Industries

  • Rich Valuations – Page Industries is trading on rich valuations since a long time. The 3-year average PE ratio of Page Industries is close to 72 and the 5-year average PE ratio is almost 63 and that of 10-year average is 46. The current PE ratio of the company is 55. If you compare the current PE ratio with its 3 and 5-year averages then the stock may look attractive, but when u bring the 10-year average PE ratio in to the picture, then even now the stock look a little expensive. So what are the reason behind these rich valuations? – Page Industries has the license to sell Jockey Originals US in India and they have this license till 2040. So, the company has a strong and clear earnings visibility for the next 21 years. In the last 2-3 years the sales growth as come to 20% level. Earlier this growth range was around 30% and that is why it has so rich valuations earlier. Whether the current rich valuations be continued is a little doubtful.
  • Segment-wise Volume Growth – Analysts are saying that the company, that is Page Industries, is not reporting segment-wise volume growths. This is being perceived as negative thing. The company hasn’t given any clarifications on this matter.
  • No Con-calls – Investors are complaining that the company doesn’t organize any con-calls. Whenever a company releases its results, it also organizes a con-call for the analysts or the investors, so that the analysts and investors can asks their questions related to earnings or the result overall and the company then addresses those issues on the con-call. The company does not carry out these con-calls.

Positives of Page Industries

  • The company has never been in any kind off negative news.
  • No issues regarding to corporate governance have been raised on Page Industries.

Future Outlook of Page Industries

  • If the company performs better and gives encouraging numbers in the coming quarters then the market and people may forget the current problems.
  • Page Industries has recently been promoted to large cap from mid-cap, as per the categorization done by SEBI. There have been heavy corrections in the stock. The stock has come down from Rs. 36,000 to Rs. 20,000. So, there are chances that in the next re-categorization of the companies, Page Industries may again become a mid-cap company based on its average market cap.

Summary

  • The numbers of sales and profits are healthy. The fundamentals of the company look strong.
  • The valuations of the company are averagely fair.
  • Page Industries has a very strong earnings visibility.
  • The problems mentioned above are the reasons because of which the company has received negative rating and the stock of Page Industries has been hammered in the stock market.
  • There might be some more corrections in the share price of Page Industries.
  • Investors can definitely keep this stock in their radar.

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