Technology Investments And Capacity Expansion In Odisha And Karnataka Will Optimize Operations

Key Takeaways

• Expansion into smaller cities and e-commerce could enhance consumer reach and drive revenue growth significantly.
  
• Strategic investments and inventory optimization are expected to improve margins and cost efficiencies.
  
• Elevated costs and subdued demand could pressure margins and constrain revenue growth, relying on uncertain consumer demand resurgence for future improvement.

Catalysts

Manufactures, markets, and distributes textile garments and clothing accessories for men, women, and junior girls and boys in India and internationally.

• Expansion into Tier 2 and Tier 3 cities and increasing retail touchpoints should boost consumer reach and drive revenue growth.
  
• Significant growth in the e-commerce channel could lead to higher revenue growth due to its expanding consumer reach.
  
• Strategic investments in technology and digitization are expected to optimize operating expenses and improve net margins over time.
  
• Optimization of inventory levels across distribution channels should contribute to cost efficiencies and improve profit margins.
  
• Planned capacity expansion in Odisha and Karnataka indicates preparation for meeting demand increases, which could support future revenue and earnings growth.

Page Industries Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Page Industries's revenue will grow by 11.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.9% today to 14.1% in 3 years time.
• Analysts expect earnings to reach ₹9.5 billion (and earnings per share of ₹851.68) by about April 2028, up from ₹6.7 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹8.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 77.4x on those 2028 earnings, up from 74.4x today. This future PE is greater than the current PE for the IN Luxury industry at 22.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.64%, as per the Simply Wall St company report.

Page Industries Future Earnings Per Share Growth

Risks

• The company faces higher elevated costs due to digitization efforts and increased IT spending, which could pressure EBITDA margins despite recent cost controls. This could impact net margins and overall earnings.
  
• Subdued consumer demand and sales growth below 10% could hinder revenue growth, impacting the company's ability to achieve higher revenue from innerwear and athleisure categories.
  
• The potential impact of increased operating and marketing expenses might mitigate high EBITDA margins observed in recent quarters, keeping margins in the 19%-21% range, influencing net margins and profitability.
  
• With inventory levels being optimized and pressure on product pricing, future revenue growth may heavily rely on a market and consumer demand resurgence, which is uncertain, potentially affecting revenue and earnings.
  
• Limited price increases in the current fiscal year may constrain top-line growth, impacting revenue unless consumer demand significantly improves, thereby affecting the company's long-term revenue trajectory.

Valuation

• The analysts have a consensus price target of ₹44355.045 for Page Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹57500.0, and the most bearish reporting a price target of just ₹33377.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹67.4 billion, earnings will come to ₹9.5 billion, and it would be trading on a PE ratio of 77.4x, assuming you use a discount rate of 14.6%.
• Given the current share price of ₹44930.0, the analyst price target of ₹44355.05 is 1.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.