Relaxo Footwears Ltd. share price target

This we believe will drive mix improvement with overall ASPs and Margins rising in H2FY21E in our view. We continue to maintain BUY with a TP of Rs. 925 we roll forward our target PE multiple of 57x to its FY23E EPS.

Resilient performance during challenging times builds our confidence in the business model and ability to gain market share. Though we believe current gross margins (59-61%) may not be sustainable in nature, we expect EBITDA margin improvement to sustain driven by operating leverage and cost control measures. Factoring in the performance of Q3FY21, we revise our earnings estimates upwards by ~7% for FY22/23E. We bake in revenue, earnings CAGR of 12%, 20%, respectively, in FY20-23E. Over the years, Relaxo has maintained balance sheet prudence with controlled working...

Relaxo Footwear(RLXF)reported better than expected Q2FY21 on the back of 2% volume growth. The company witnessed strong recovery as ~65% of the revenue is dominated by mass footwearrange (

We recommend a BUY on RELAXO FOOTWEAR with a Target Price of Rs 816, an upside of 7% from CMP of Rs. 763 and Stop Loss Rs 710

Relaxo Footwear(RLXF) for Q2FY21 reported revenue at Rs. 576 cr on the back of 2% volume growth (22.5% above our estimates) as compared to Rs. 622 cr in the corresponding quarter of the previous year, 7.4% lower YoY.

Gross Margins - A Positive Surprise: Revenue for Q2FY21 was 7.4percent lower on YoY basis but EBITDA was up significantly,at 21.2percent on account of higher gross margins and good cost control measures.Gross margins were higher by 505 bps on account of lower inventory, tradedgoods and commodity prices.

As most people are working from home, sales of sandals, flip flops have seen a significant surge in demand. Relaxo being a dominant player in the aforesaid categories, through its strong portfolio of brands (Flite', Bahamas', Hawaii') has witnessed a swift recovery in volumes and captured market share from unorganised players in H1FY21. While sale of shoes continues to be laggards (sports, canvas), green shoots are visible with gradual opening up of the economy. Further, on festive demand trends, healthy traction has been seen in October in most regions except Kerala....

We recommend a BUY on RELAXO FOOTWEAR with a Target Price of Rs 728 an upside of 9% from CMP of Rs. 668 and Stop Loss Rs 607

Plan to set up new manufacturing plant at Bhiwadi To cater to the growing demand, the company has commenced commercial production at its new plant at Bhiwadi (Rajasthan) for manufacturing flip flops (Hawaii range). It has proposed to add capacity of 100K pairs/day in Bhiwadi plant with total investment of Rs 900mn which will be funded through internal accruals. The capacity will be added within three years and is likely to take Relaxo's total capacity to 800K pairs/day...

Outlook and Valuation: We continue to bank on Relaxo in the medium to long term as the best placed stock in the space on account of a good rural and urban mix and excellent track record of the management, coupled with good financial stability.