With a market capitalisation of ₹37,960 crores, Page Industries continues to command premium valuations as the largest player in India's garments and apparels sector. However, the quarter's results underscore growing challenges in protecting profitability amid rising employee costs and operational pressures, even as the company maintains its position as a quality franchise with exceptional return ratios.
Financial Performance: Revenue Strength Masks Margin Concerns
Page Industries delivered its strongest quarterly revenue performance in Q3 FY26, with net sales climbing 7.43% sequentially to ₹1,386.76 crores from ₹1,290.86 crores in Q2 FY26. On a year-on-year basis, revenue growth stood at a modest 5.61%, reflecting the company's ability to maintain market share in a competitive apparel landscape. The sequential acceleration was particularly noteworthy given the typical seasonality patterns in the garments sector.
However, the revenue momentum failed to translate into bottom-line growth. Net profit declined 7.38% quarter-on-quarter to ₹189.54 crores from ₹194.76 crores, marking the second consecutive quarter of profit decline. Year-on-year, the profit contraction was even more pronounced at 7.38%, down from ₹204.66 crores in Q3 FY25. This divergence between top-line and bottom-line performance highlights the margin pressures that have emerged as the company's primary challenge.
Operating margins (excluding other income) improved sequentially by 129 basis points to 22.94% in Q3 FY26 from 21.65% in the previous quarter, suggesting some operational efficiency gains. However, the year-on-year comparison reveals a 10 basis point decline from 23.04% in Q3 FY25. More concerning is the PAT margin compression, which fell to 13.67% in Q3 FY26 from 15.09% in Q2 FY26 and 15.59% in Q3 FY25, indicating that cost pressures are intensifying faster than the company's ability to pass them through or offset them operationally.
| Metric | Q3 FY26 | Q2 FY26 | Q1 FY26 | Q4 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 1,386.76 | 1,290.86 | 1,316.56 | 1,098.07 | +7.43% | +5.61% |
| Operating Profit (₹ Cr) | 318.10 | 279.52 | 294.68 | 235.23 | +13.80% | +5.15% |
| Net Profit (₹ Cr) | 189.54 | 194.76 | 200.80 | 164.01 | -7.38% | -7.38% |
| Operating Margin (%) | 22.94% | 21.65% | 22.38% | 21.42% | +129 bps | -10 bps |
| PAT Margin (%) | 13.67% | 15.09% | 15.25% | 14.94% | -142 bps | -192 bps |
Employee costs emerged as a significant pressure point, rising to ₹233.11 crores in Q3 FY26 from ₹247.58 crores in Q2 FY26, though this represented a sequential decline. Year-on-year, employee expenses increased 13.02% from ₹206.24 crores, outpacing revenue growth and suggesting wage inflation and potentially higher headcount to support business expansion. Other income declined sequentially to ₹12.43 crores from ₹19.49 crores, further pressuring overall profitability.
Key Margin Concern
The 192 basis point year-on-year decline in PAT margin to 13.67% represents the sharpest compression in recent quarters, driven by a combination of employee cost inflation, higher depreciation, and subdued other income. This trend requires close monitoring as it threatens the company's historically strong profitability profile.
Operational Excellence: Exceptional Returns Justify Premium Valuations
Despite the near-term margin pressures, Page Industries continues to demonstrate exceptional operational efficiency and capital productivity. The company's latest return on equity (ROE) stands at an impressive 54.24%, significantly above its five-year average of 45.83% and placing it in the top tier of Indian consumer companies. This exceptional ROE reflects the company's asset-light business model, strong brand equity through the Jockey franchise, and efficient working capital management.
The company's return on capital employed (ROCE) tells an even more compelling story, with the latest figure at 85.93% compared to a five-year average of 71.73%. The half-yearly ROCE for FY26 reached an all-time high of 64.03%, underscoring the company's ability to generate substantial returns on every rupee of capital deployed. This capital efficiency stems from Page Industries' negative net debt position (net cash company with average net debt to equity of -0.17) and high asset turnover ratios.
The balance sheet remains fortress-like with zero long-term debt as of March 2025 and shareholder funds of ₹1,407.20 crores. The company's working capital management has improved significantly, with the debtors turnover ratio reaching a record 30.00 times on a half-yearly basis, indicating faster collection cycles and efficient inventory management. Current assets of ₹1,742.38 crores comfortably exceed current liabilities of ₹1,010.50 crores, providing ample liquidity cushion.
Operational Strength: Zero-Debt, High-Return Business Model
Page Industries operates as a net cash company with exceptional return ratios (ROE: 54.24%, ROCE: 85.93%) that justify its premium valuations. The company's asset-light model, exclusive brand licensing, and efficient working capital management create a sustainable competitive moat. With zero debt and strong cash generation (₹1,203 crores operating cash flow in FY25), the company maintains financial flexibility for growth investments and shareholder returns.
The Margin Dilemma: Balancing Growth with Profitability
The persistent margin compression over the past three quarters represents the most significant challenge facing Page Industries. While the company has maintained its market leadership and delivered consistent revenue growth, the inability to protect margins suggests structural cost pressures that may not be temporary in nature. Employee costs as a percentage of revenue have been creeping upward, reflecting both wage inflation and potentially increased investments in talent to support expansion initiatives.
The company's gross profit margin declined to 20.39% in Q3 FY26 from 22.19% in Q2 FY26 and 23.20% in Q3 FY25, indicating pressure at the product level. This could stem from increased input costs, greater promotional activities, or unfavourable product mix shifts. The operating leverage that typically benefits the company during periods of revenue growth appears to be working in reverse, with fixed costs growing faster than the top line.
Depreciation charges have been relatively stable at ₹26.54 crores in Q3 FY26, but the company's capital expenditure programme (evidenced by fixed assets increasing to ₹512.57 crores in FY25 from ₹320.29 crores in FY24) suggests ongoing investments in infrastructure that will lead to higher depreciation in coming quarters. Interest costs remain modest at ₹12.73 crores, benefiting from the company's zero-debt status, but the tax rate of 26.04% in Q3 FY26 limits any potential for tax-driven margin improvement.
| Margin Analysis | Q3 FY26 | Q2 FY26 | Q3 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Gross Profit Margin | 20.39% | 22.19% | 23.20% | -180 bps | -281 bps |
| Operating Margin (Excl OI) | 22.94% | 21.65% | 23.04% | +129 bps | -10 bps |
| EBITDA Margin | 23.83% | 23.16% | 24.11% | +67 bps | -28 bps |
| PAT Margin | 13.67% | 15.09% | 15.59% | -142 bps | -192 bps |
| Employee Cost/Sales | 16.81% | 19.18% | 15.71% | -237 bps | +110 bps |
Industry Leadership: How Page Industries Compares to Peers
Page Industries maintains its position as the second-largest company by market capitalisation in India's garments and apparels sector, commanding a premium valuation that reflects its quality credentials and brand strength. The company's ROE of 45.83% significantly outpaces industry peers, with Trent at 19.25%, K P R Mill at 21.04%, and Trident at 12.31%. This superior capital efficiency justifies the company's elevated price-to-book multiple of 28.23x, though it trades at a substantial premium to peers like K P R Mill (6.28x) and Trident (3.11x).
The company's price-to-earnings ratio of 52.05x reflects market expectations of sustained growth and quality, though it trades at a premium to K P R Mill (40.09x) and Trident (32.39x), whilst being below Trent's 88.63x multiple. Page Industries' net cash position (net debt to equity of -0.17) stands out favourably against peers, with most competitors carrying positive debt loads. The dividend yield of 1.75% exceeds most peers and reflects a healthy payout ratio of 72.51%, indicating confidence in cash generation whilst returning substantial capital to shareholders.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| Page Industries | 52.05 | 28.23 | 45.83% | 1.75% | -0.17 |
| Trent | 88.63 | 24.07 | 19.25% | 0.12% | 0.24 |
| K P R Mill | 40.09 | 6.28 | 21.04% | 0.51% | -0.24 |
| Trident | 32.39 | 3.11 | 12.31% | N/A | 0.22 |
| Welspun Living | 38.56 | 2.82 | 12.02% | 1.20% | 0.39 |
The premium valuations are supported by Page Industries' superior business model, which combines exclusive brand licensing for Jockey and Speedo with pan-India distribution reach and operational excellence. However, the recent margin pressures raise questions about whether the current multiples fully account for near-term profitability challenges. The company's five-year sales growth of 16.29% and EBIT growth of 30.74% demonstrate strong historical performance, but the PEG ratio of 2.26 suggests the stock may be pricing in optimistic growth assumptions.
Valuation Analysis: Premium Justified but Limited Upside
Page Industries trades at a price-to-earnings ratio of 52.05x based on trailing twelve-month earnings, representing a premium to the garments and apparels industry average of 48x. The valuation reflects the company's quality credentials, including its zero-debt balance sheet, exceptional return ratios, and strong brand equity. However, at current levels of ₹35,661.80, the stock has corrected 29.34% from its 52-week high of ₹50,470.60, suggesting some valuation compression has already occurred.
The price-to-book value multiple of 28.23x appears elevated in absolute terms but finds justification in the company's ROE of 54.24%, which significantly exceeds the cost of equity. Using the DuPont framework, the high P/BV multiple is mathematically supported by the exceptional returns on equity. The EV/EBITDA multiple of 35.56x and EV/EBIT of 39.33x similarly reflect premium valuations, though these multiples have moderated from peak levels seen in 2024.
The dividend yield of 1.75% based on the latest dividend of ₹125 per share provides some downside support, particularly for long-term investors seeking income alongside capital appreciation. The company's consistent dividend track record (72.51% payout ratio) and strong cash generation (₹1,203 crores operating cash flow in FY25) underpin the sustainability of dividend payments. However, the PEG ratio of 2.26 suggests limited margin of safety, as it indicates the stock is trading at more than twice the expected growth rate.
Valuation Dashboard: Quality at a Price
P/E Ratio (TTM): 52.05x | Industry P/E: 48x | Premium: 8.4%
Price to Book: 28.23x | ROE Justification: 54.24% (Strong)
EV/EBITDA: 35.56x | EV/Sales: 7.88x
Dividend Yield: 1.75% | PEG Ratio: 2.26 (Elevated)
Overall Assessment: Very Expensive – Quality franchise trading at full valuations with limited margin of safety. Near-term margin pressures add to valuation concerns.
Shareholding: Institutional Confidence Remains Steady
The shareholding pattern reveals stable promoter holding at 42.89% over the past five quarters, indicating strong alignment between management and minority shareholders. The absence of any pledging of promoter shares further reinforces the quality of governance and financial stability. Institutional holdings aggregate to 52.21%, demonstrating sustained confidence from sophisticated investors despite the stock's recent underperformance.
Foreign institutional investors (FIIs) reduced their stake to 20.72% in Q3 FY26 from 23.21% in Q2 FY26, marking a sequential decline of 249 basis points. This reduction could reflect profit-booking after the stock's long-term outperformance or concerns about near-term margin pressures. However, FII holding remains substantial and above the 20% threshold that typically indicates strong institutional conviction.
Mutual funds increased their stake to 21.59% in Q3 FY26 from 19.64% in Q2 FY26, adding 195 basis points sequentially. This contrarian buying by domestic institutional investors suggests confidence in the company's long-term prospects despite near-term challenges. Insurance companies maintained stable holdings at 5.30%, whilst other domestic institutional investors (DIIs) increased their stake to 4.60% from 4.40%, indicating broad-based domestic institutional support.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 42.89% | 42.89% | 42.89% | 0.00% |
| FII Holding | 20.72% | 23.21% | 24.03% | -2.49% |
| Mutual Fund Holding | 21.59% | 19.64% | 19.65% | +1.95% |
| Insurance Holdings | 5.30% | 5.20% | 5.39% | +0.10% |
| Other DII Holdings | 4.60% | 4.40% | 3.46% | +0.20% |
| Non-Institutional | 4.91% | 4.67% | 4.59% | +0.24% |
Stock Performance: Significant Underperformance Across Timeframes
Page Industries' stock has delivered disappointing returns across most timeframes, significantly underperforming both the Sensex and its own sector. Over the past year, the stock declined 22.13% whilst the Sensex gained 6.44%, resulting in a negative alpha of 28.57 percentage points. This underperformance accelerated over longer timeframes, with three-year returns of -10.43% compared to Sensex gains of 36.94% (alpha of -47.37 percentage points).
The six-month performance has been particularly weak, with the stock declining 21.98% against Sensex gains of 3.23%, reflecting mounting investor concerns about margin sustainability and growth deceleration. However, recent momentum has improved, with the stock gaining 8.06% over the past week compared to Sensex gains of 0.91%, and posting a modest 0.24% gain over the past month against Sensex decline of 2.49%. This recent outperformance suggests some stabilisation in investor sentiment.
The stock's beta of 1.03 indicates it moves broadly in line with the broader market, though the recent underperformance has been driven more by company-specific factors than market movements. The stock currently trades below all its key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating technical weakness. The distance from the 52-week high of 29.34% provides some valuation comfort, though further downside cannot be ruled out if margin pressures persist.
| Period | Stock Return | Sensex Return | Alpha | Sector Return |
|---|---|---|---|---|
| 1 Week | 8.06% | 0.91% | +7.15% | — |
| 1 Month | 0.24% | -2.49% | +2.73% | — |
| 3 Month | -11.02% | -0.17% | -10.85% | — |
| 6 Month | -21.98% | 3.23% | -25.21% | — |
| 1 Year | -22.13% | 6.44% | -28.57% | -25.69% |
| 2 Years | -2.86% | 16.15% | -19.01% | — |
| 3 Years | -10.43% | 36.94% | -47.37% | — |
| 5 Years | 21.33% | 64.22% | -42.89% | — |
The technical trend remains "mildly bearish" with multiple indicators pointing to weakness. The MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate mildly bearish momentum. The On-Balance Volume (OBV) trend is mildly bearish, suggesting selling pressure, though Dow Theory shows a mildly bullish signal on the weekly timeframe. Immediate support lies at the 52-week low of ₹32,132.95, whilst resistance is expected at the 20-day moving average of ₹33,684.30.
Investment Thesis: Quality Franchise Facing Transitional Challenges
Page Industries presents a complex investment case that balances exceptional long-term quality credentials against near-term profitability challenges. The company's fundamental strengths remain intact, including its zero-debt balance sheet, exceptional return ratios (ROE: 54.24%, ROCE: 85.93%), strong brand equity through exclusive Jockey and Speedo licensing, and market leadership in India's branded innerwear segment. The five-year operating profit growth of 30.74% demonstrates the company's ability to scale efficiently.
However, the persistent margin compression over three consecutive quarters raises concerns about the sustainability of historical profitability levels. The 192 basis point year-on-year decline in PAT margin to 13.67% reflects structural cost pressures that may require time to resolve. Employee cost inflation, rising depreciation from capacity expansion, and gross margin pressure suggest the company is navigating a transitional phase that could extend for several quarters.
The valuation framework offers limited comfort, with the stock trading at 52.05x trailing earnings and a PEG ratio of 2.26, indicating full pricing of growth expectations. Whilst the 29.34% correction from 52-week highs has created some valuation cushion, the "very expensive" overall assessment suggests patience is warranted. The positive financial trend (driven by record quarterly revenues and highest-ever ROCE) provides some support, but the mildly bearish technical trend indicates market participants remain cautious.
Mojo 4 Dots Analysis
1. Near Term Drivers: MIXED – Positive quarterly financial trend offset by mildly bearish technicals
2. Quality: EXCELLENT – Outstanding quality company with zero debt, exceptional ROE/ROCE, and strong governance
3. Valuation: VERY EXPENSIVE – Trading at full valuations (P/E: 52x, PEG: 2.26) with limited margin of safety
4. Overall Score: 55/100 (HOLD) – Quality franchise facing near-term margin pressures; wait for better entry points
KEY STRENGTHS ✓
- Exceptional Capital Efficiency: ROE of 54.24% and ROCE of 85.93% place the company in the top tier of Indian consumer companies
- Zero-Debt Balance Sheet: Net cash position with average net debt to equity of -0.17 provides financial flexibility
- Strong Brand Moat: Exclusive licensing for Jockey and Speedo creates sustainable competitive advantages
- Market Leadership: Second-largest company in garments sector with pan-India distribution reach
- Robust Cash Generation: Operating cash flow of ₹1,203 crores in FY25 supports growth and dividends
- Institutional Confidence: 52.21% institutional holdings with recent mutual fund accumulation
- Consistent Dividend Track Record: 72.51% payout ratio with 1.75% yield demonstrates shareholder-friendly approach
KEY CONCERNS ⚠
- Persistent Margin Compression: PAT margin declined 192 bps YoY to 13.67%, marking third consecutive quarter of decline
- Employee Cost Inflation: Rising wage costs outpacing revenue growth, pressuring profitability
- Gross Margin Pressure: Decline to 20.39% from 23.20% YoY suggests product-level pricing challenges
- Premium Valuations: P/E of 52x and PEG of 2.26 leave limited margin of safety
- Stock Underperformance: 22.13% decline over past year with negative alpha of 28.57 percentage points
- FII Selling Pressure: Foreign investors reduced stake by 249 bps in Q3 FY26
- Technical Weakness: Stock trading below all major moving averages with mildly bearish trend
Outlook: What to Watch in Coming Quarters
The trajectory for Page Industries over the next 12 months will largely depend on management's ability to arrest the margin decline and demonstrate operating leverage as revenue growth continues. Key monitoring points include quarterly margin trends (particularly gross and PAT margins), employee cost management, pricing power in core categories, and the success of capacity expansion initiatives. The company's guidance on demand trends, competitive intensity, and input cost outlook will be critical for assessing the duration of the current margin pressure phase.
Positive catalysts include potential margin recovery if input costs stabilise, operating leverage from higher revenues, successful new product launches or category expansion, continued market share gains in branded innerwear, and sustained cash generation supporting dividend growth. The company's strong balance sheet provides flexibility to invest in growth whilst maintaining shareholder returns, which could support valuation multiples if execution improves.
Red flags to watch include further sequential margin decline beyond Q4 FY26, sustained employee cost inflation above 15% of sales, loss of market share to competitors or private labels, and any deterioration in working capital metrics. Additionally, continued FII selling, further technical breakdown below ₹32,000 levels, or any signs of demand weakness in core categories would warrant reassessment of the investment thesis.
POSITIVE CATALYSTS
- Margin stabilisation or recovery in Q4 FY26 and beyond
- Operating leverage from revenue growth driving profitability improvement
- Successful capacity expansion yielding efficiency gains
- Market share gains in branded innerwear and athleisure segments
- Input cost stabilisation or decline benefiting gross margins
RED FLAGS
- Further sequential margin decline in Q4 FY26
- Employee costs remaining above 16% of sales
- Continued FII selling or institutional exit
- Technical breakdown below ₹32,000 support levels
- Signs of demand weakness or competitive market share loss
The Verdict: Quality Franchise at Full Price
Score: 55/100
For Fresh Investors: Not recommended for fresh buying at current levels. The stock trades at very expensive valuations (P/E: 52x, PEG: 2.26) with near-term margin pressures creating execution uncertainty. Wait for either a meaningful correction towards ₹30,000-32,000 levels or clear evidence of margin recovery before initiating positions. The quality of the business justifies a place in long-term portfolios, but timing matters at these valuations.
For Existing Holders: Continue to hold with a 12-18 month investment horizon. The company's exceptional return ratios (ROE: 54.24%, ROCE: 85.93%), zero-debt balance sheet, and strong brand moat provide long-term value creation potential. Near-term margin pressures appear transitional rather than structural. However, monitor quarterly results closely for signs of sustained margin recovery. Consider averaging down only if the stock corrects to ₹30,000-32,000 levels whilst fundamentals remain intact.
Fair Value Estimate: ₹38,000-40,000 (6.6% to 12.2% upside) – Based on 45-48x forward earnings, assuming margin recovery to 14.5-15% PAT levels by FY27. Current price of ₹35,661 offers limited upside with elevated downside risk if margins deteriorate further.
Note– ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investments in equity markets are subject to market risks, and investors may lose part or all of their capital.
