Dolat Capital Market's research report on Relaxo Footwear
Revenue jumped 12% YoY to Rs 6.7bn in Q3FY21 - came ahead of our estimate. Festive season, strong marriage season and re-opening of markets must have resulted in strong revenue growth. GM/EBITDA expanded by 110/520bps mainly due to benign RM prices and improved operating efficiencies during the quarter. Going ahead, the margins would remain high versus peers considering larger contribution of distribution business compared to retail business. In the long run, we believe that the company would continue its strong performance by increasing penetration in South and West and is likely to further benefit from premiumization. Relaxo should continue to outpace Bata in terms of revenue growth, going ahead.
We have upward revised our FY21/22/23E EPS estimates to Rs 11.2/12.8/14.8 implying +21.5/7.4/8.8% revision in our estimates. We value the stock at 60x FY23E EPS to arrive at a TP of Rs 888. As the CMP does not support our rating, we are downgrading to Accumulate. We remain optimistic on overall business and anticipate improvement in revenue growth, going ahead. Any dip in stock price should be considered as buying opportunity.
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