Buy Relaxo Footwear; target of Rs 1080: Sharekhan

Sharekhan's research report on Relaxo Footwear

Relaxo Footwears’ (Relaxo’s) Q1FY2024 numbers met expectations, with revenue/PAT growing by 10.7%/45.6% y-o-y and EBITDA margin expansion at 165 bps y-o-y. The company sold 5.1 crore pairs during the quarter (higher by 34.2% y-o-y). As open footwear volumes improve, the company is expected to deliver double-digit volume-led revenue growth in FY2024. Over the next 2-3 years, growth is expected to be driven by distribution expansion, higher share of close-ended footwear and a better mix. Management expects raw material prices to fall further, which will drive up EBIDTA margins to ~15-16% in FY2025 from 12% in FY2023.

Outlook

Stock trades at 68.2x its FY2025E earnings. We maintain a Buy rating with a revised PT of Rs. 1,080.