The five-digit stock price did not deter investors from lapping up the stock of Page Industries, thanks to its phenomenal show in the June 2018 quarter and continued strong outlook. The company’s shares jumped 3.4 per cent on Tuesday before touching a new all-time high of ₹34,200 on the BSE; it is up more than 10 per cent in just four trading sessions.

Though the company reported a modest topline growth of 17 per cent (but led by good realisation improvement) in the June quarter, profitability improvement is what investors like or value more. The company delivered just that with a jump of 39 per cent and 46 per cent in operating profit and net profit, respectively.

While operating profit growth has been driven by improved product mix and cost efficiencies, net profit jump — 17 per cent higher than expectations — is due to rising share of outsourcing, said Ashit Desai, analyst at Emkay Research.

Outsourcing helps

Net profit growth is expected to further improve due to the management’s strategy of increasing outsourcing, which will lead to working capital reduction (19.1 per cent of sales compared to 21.7 per cent in FY18), improvement in strong cash generation (₹470 crore from ₹290 crore in FY18) and improved return on capital employed, said analysts.

Even as the business outlook continues to be robust, valuation of the stock at 81 times and 65 times for FY19 and FY20 estimated earnings looks very stretched. New investors should wait for better entry point while existing investors should hold the stock, according to analysts.

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