Dolat Capital is bullish on Relaxo Footwear has recommended buy rating on the stock with a target price of Rs 936 in its research report dated November 05, 2018.
Dolat Capital's research report on Relaxo Footwear
Relaxo’s Q2FY19 revenues jumped 18.6% YoY to ` 5.5bn came in line with our estimates. This is attributed to good volume growth during the quarter. Relaxo continues to witness better growth compared to Bata (+15%). We anticipated higher revenues for Relaxo compared to Bata based on our recent channel checks. The addition of new stores, increased online sales and premiumization was in line with our estimates. Going ahead, we believe that the company would continue to increase its distribution reach in southern and western markets. Further, premiumization would help it to gain the margins. With GST rate change (18% to 5% for ` 500 – ` 1,000) we believe that the contribution of mid category would grow for the company, going ahead (15% to 20%). We also believe that with changes in tax structure, the organized sector would continue to outperform and Relaxo being a market leader in the economy category, is poised to take an advantage of the growing share. We have maintained our FY19E and FY20E earnings estimate at `17.6 and ` 22.3 respectively as Q2 results were in line with our estimates.
We are valuing Relaxo at 42x FY20E to arrive at a TP of ` 936. Maintain Buy.
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