Sell Relaxo Footwears; target of Rs 375: ICICI Securities

ICICI Securities's research report on Relaxo Footwears

Relaxo Footwears (RLXF) reported another weak quarter with EBITDA declining 7% YoY (6% miss) as volume (-10% YoY) was impacted by overall muted demand and restructuring of its distribution model. FY25 was a subdued year for RLXF, with a 6% YoY decline in EBITDA, led by a 9% YoY volume decline and a 25bp YoY margin contraction. Management believes FY25 was the bottom and expects modest revenue recovery from 2HFY26. Further, the company is prioritizing profitable growth in FY26, as it targets 100bp EBITDA margin improvement driven by operational efficiency and a sharper focus on product and digital initiatives.

Outlook
We cut our FY26-27E revenue by 2-3% and EBITDA by 3-5%, reflecting a challenging market environment and the ongoing restructuring efforts. We build in a revenue/EBITDA CAGR of 8/11% over FY25-27E and await signs of demand recovery before we turn more constructive on the stock. We reiterate our Sell rating with a revised TP of INR375 (premised on 40x FY27E P/E). The company currently trades at 50x 1-year forward P/E.

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