Buy Relaxo Footwears; target of Rs 1005: Sharekhan

Sharekhan's research report on Relaxo Footwears

Relaxo Footwears (Relaxo’s) Q3FY2021 revenue was exactly in-line with our expectation at Rs. 672 crore (grew by 12%y-o-y), led by improving demand across categories and geographies. Better product mix, benign input prices led to 107 bps expansion in gross margin; saving in selling and administrative expenses resulted in OPM expanding by 519 bps to 22%. Going ahead, demand is likely to improve due to reducing COVID-19 cases leading to increased mobility and improvement in economic activities.

Outlook

We have increased our estimates for FY2021/FY2022/FY2023 by 11%/9%/8% to factor higher margin trajectory. We maintain our Buy recommendation on the stock with a PT of Rs. 1,005.