Page Industries Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Page Industries Ltd (PAGEIND) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:09:41] Tejash Shah from Spark Capital asked about more information on the slowdown and when demand is expected to turn around despite Omicron. V.S. Ganesh MD said the subdued market and the implementation of the auto-management system impacted 4Q performance. The company is willing to endure a few quarters of tightness for the long-term benefits of this important transformation project.

• [00:14:08] Tejash Shah at Spark Capital enquired about the current slowdown qualitatively, if it’s in higher in some category or channel. V.S. Ganesh MD replied that the company had healthy growth in the online channel but is experiencing a postponement of demand across the offline channel. The company believes it will be the first to recover.

• [00:14:51] Tejash Shah with Spark Capital queried if the company will take any price actions to revive demand. V.S. Ganesh MD clarified that PAGEIND is fairly priced and does not see an immediate need for price intervention as it has performed better than many other brands.

• [00:16:39] Gaurav Jogani of Axis Capital asked if the current demand normalization is temporary or should it be used as the right metric to look at demand. V.S. Ganesh MD said the market is subdued and it will take more time for the old demand to return. The company is patiently watching and ready to bounce back when the market recovers.

• [00:17:51] Ashish Kanodia from Citi asked that given the high inventory level at the end of Q3 and the current demand scenario, what is the expected inventory build-up in 4Q. V.S. Ganesh MD said the high inventory level is due to lower than anticipated demand and a high level of raw material inventory. The company converted raw material to finished goods to utilize capacities and manage operating costs and expects to see QonQ improvements in inventory levels.

• [00:27:08] Avi Mehta at Macquarie asked if the demand trend has weakened further from 3Q levels and should the comment on recovery be read as a sense of tax changes going into 1Q24. V.S. Ganesh MD replied that the demand has flattened further in 4Q and was not expected to be as bad as 3Q. The company has adjusted to the reality and taken necessary corrective actions.

• [00:29:48] Avi Mehta at Macquarie enquired about details on pricing hikes. V.S. Ganesh MD replied that PAGEIND did a price hike last year, 3.6% and the company is not seeing an immediate need for any interaction.

• [00:30:51] Nihal Mahesh from Nuvama asked if it’s possible to gauge the impact of ARS by looking at secondary to tertiary sales and lower replenishment. V.S. Ganesh MD answered that looking at secondary sales and end-to-end visibility on the EBO side is a good way to gauge the impact of ARS. The company added that it has observed enhanced subduedness in the last 2 months.

• [00:34:08] Nihal Mahesh at Nuvama enquired what initiatives the company is taking to sustain growth post the COVID bump in the subdued market. V.S. Ganesh MD said the company has a bullish long-term view on the category due to nice pricing and high fitness awareness. The company is focusing on product innovation and upgrading its existing product portfolio to appeal to a cross-section of consumers.

• [00:38:12] Manish Poddar of Motilal Oswal asked about inventory in trade. Gagan Sehgal COO said the company typically operate at around the 50-55-day inventory at the trade level. Currently PAGEIND is maintaining at around 48-50 days of trade inventory.

• [00:39:38] Manish Poddar of Motilal Oswal enquired if there is any broad sales cut by category for the full year ’23. V.S. Ganesh MD replied that all categories have grown at the same level and there has not been much difference in growth.

• [00:44:01] Devanshu Bansal from Emkay Global enquired about the launch of denim category. V.S. Ganesh MD said the company conducted a test to gauge the pulse of the market and is continuing with it. The growth product was announced to see how consumer expectations are evolving and to take the category further forward.

• [00:47:46] Ankit Kedia of Phillip Capital queried if the old products bought by the distributor during peak COVID time been taken back by the company or liquidated in the channel in the last 2-3 quarters. V.S. Ganesh MD replied that the company usually don’t take it back. So it gets recreated in the due course of the business in the channel.

• [00:49:51] Ankit Kedia of Phillip Capital asked that will PAGEIND increase A&P spend for the full year or maintain it to preserve margins, considering the historically strong 1Q, improved demand, and partly resolved ARS issues. V.S. Ganesh MD said PAGEIND’s A&P spend is returning to normal levels after going media dark during the pandemic. The company believes this spending is essential for growth and is not planning to cut it. PAGEIND remains bullish on its long-term outlook.

• [00:58:56] Varun Singh from ICICI Securities asked about the reasons for the steep decline in the top-line growth in the essential innerwear category, which has low penetration and a 10% growth rate, apart from the software implementation issue. V.S. Ganesh MD said the decline in growth is attributed to market liquidity issues and overpriced stock rather than competition intensity or brand fatigue. PAGEIND is confident in the brand’s direction based on positive feedback from brand equity studies.