Sharekhan's research report on Relaxo Footwears
Unlike other retail or footwear companies, Relaxo’s business recovered faster (with revenues returned to 93% of pre-COVID levels in Q2), led by strong demand for open-ended value footwear products (contributed 80% revenues in H1). Volumes and realisations clocked CAGRs of 10% and 3% over FY2017-20. Sustained innovation, focus on improving penetration in southern and western India and shift to branded products will aid sustained volume growth. A better mix led by strong traction in premium products will drive realisations. OPM improved to 17% in FY2020 from 14% in FY2017. We expect margins to keep rising in the coming years with higher sales volume and better operating efficiencies.
We maintain a Buy on Relaxo Footwears Limited (Relaxo) with a revised PT of Rs. 930; it remains one of our top picks in the consumer discretionary space with value-for-money offerings; strong profitability and a lean balance sheet.
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