Page Industries sees festive-led volume recovery despite Q2 margin pressure

Investment View and Valuation

Motilal Oswal retained its Buy rating on Page Industries after a weak 2QFY27 performance, attributing the shortfall mainly to the shift in festive demand into October–November. The broker believes management’s FY27 double-digit volume-growth guidance remains intact, supported by festive inventory build-up, product launches and marketing.

Motilal Oswal models a 12 per cent revenue CAGR and an 11 per cent EBITDA CAGR over FY26–29E. It values the stock at 40 times September 2028E EPS to derive a target price of Rs 40,000.

2QFY27 Financial Performance

Page Industries reported revenue growth of 11.5 per cent YoY to Rs 1,440 crore in 2QFY27, below Motilal Oswal’s estimate of Rs 1,500 crore. Volume increased 5.5 per cent YoY to 59.7 million pieces, compared with the broker’s expectation of 12 per cent growth.

The delayed festive season affected September primary volumes as distributors deferred inventory build-up. Supply constraints in select SKUs also resulted in an estimated 3–4 per cent loss of primary orders because of inventory unavailability. Order fulfilment declined to 96–97 per cent from the historical 98–99 per cent, but subsequently improved to 97–98 per cent. Management sees scope for a further 1–1.5 percentage point improvement. Tertiary sales were stable, while October 2026 performance was encouraging.

Margin Performance and First-Half Trends

Gross margin contracted 270bp YoY to 57.2 per cent because of inflation in cotton and synthetic inputs, versus Motilal Oswal’s estimate of 58.5 per cent. Strategic sourcing and supply-chain initiatives partly absorbed the cost pressure, while a calibrated 2.5 per cent price increase in May partly offset raw-material inflation.

EBITDA rose 7 per cent YoY to Rs 300 crore, below the Rs 320 crore estimate, while EBITDA margin declined 80bp YoY to 20.8 per cent. PBT rose 4 per cent YoY to Rs 270 crore and adjusted PAT increased 4 per cent YoY to Rs 200 crore, both below Motilal Oswal’s expectations. In 1HFY27, sales and EBITDA grew 10 per cent and 3 per cent YoY respectively, while adjusted PAT was flat.

Growth Outlook and Business Drivers

Management said consumption trends remained positive and retained its double-digit FY27 volume-growth guidance despite 1HFY27 volume growth of 5.6 per cent. It expects 2HFY27 growth to be driven by festive stocking, new launches in men’s innerwear and bras, and marketing campaigns.

Athleisure, outerwear and women’s innerwear are expected to outgrow men’s innerwear, supported by lower penetration and higher investment. Competition was subdued in 1QFY27 and 2QFY27 relative to the preceding three years, although festive consumer offers and discounting increased. The Disney and Marvel range received an encouraging response.

Page Industries plans to add 8,000–10,000 outlets in FY27, above its historical annual addition of about 7,000–8,000 outlets.

Margins, Capacity and Key Risks

Management indicated that the 2QFY27 margin is a reasonable near-term run rate. Input-cost inflation remains a margin risk, although calibrated pricing, sourcing efficiencies and expected normalisation in input costs could support profitability. Management reiterated its long-term EBITDA margin guidance of 19–21 per cent, while Motilal Oswal estimates around 21.5 per cent for FY27 and FY28.

Odisha and KRPA 2 plants are operating at around 40 per cent of potential capacity. Full ramp-up is expected to take another 1.5 years, with peak utilisation targeted by end-FY28.

Page Industries inadvertently breached FDI rules for online sales of imported products during FY15–26 involving Rs 48 crore. The RBI asked the company to seek post-facto DPIIT approval. Management stated that it is now fully compliant and expects no operational impact, although a potential penalty remains a risk.