Neutral Relaxo Footwears; target of Rs 790: Motilal Oswal

Motilal Oswal's research report on Relaxo Footwears

Relaxo Footwears posted a decline in revenue/PAT by 2%/3% YoY (9%/21% miss) in 4QFY24 due to weak momentum in closed footwear and BIS implementation. However, 810bp improvement in GM translated into 70bp EBITDAM improvement. Price cuts in the last couple of quarters have improved its competitive edge, driving growth in open footwear. We believe that price reduction, softening RM prices and renewed focus on sports footwear will drive volume growth for Relaxo, which should bolster the growth outlook. We have cut our estimates, considering the current weak macro environment and slow recovery. We estimate a CAGR of 12%/28% in revenue/PAT over FY24-26. The stock is trading at 64x FY26E EPS and appears expensive in a soft earnings environment. We reiterate our Neutral rating.

Outlook

We ascribe a P/E of 60x on FY26E EPS to arrive at our TP of INR790 and reiterate our Neutral rating on the stock.