Relaxo Footwears Q2 Review - Higher Competitive Intensity Weighs On Growth; Assign 'Sell': Yes Securities

Yes Securities Report

With a loss of market share due to increased competition we believe Relaxo Footwears Ltd. would register a flattish volume growth in FY25E. The resurgence in demand with the festive and wedding season should see H2 FY25 to be stronger than H1 FY25.

Volume growth should be aided by the implementation of BIS that would weed out the regional, unorganized players. Hence, we expect a 4% volume compound annual growth rate over FY24-FY27E as company seeks to regain lost market share.

We expect an average selling price improvement of 3% CAGR over FY24-FY27E as company aims to improve product mix. We reckon margins to improve back to 14% by FY27E.

Overall, we expect revenue/Ebitda/PAT to grow at 7%/7%/10% CAGR respectively over FY24-FY27E. At current market price, stock trades at a rich multiple of 70 times on FY27E EPS of Rs 10.6.

We continue to value the company at P/E(x) of 60 times, arriving at a target price of Rs 636. Hence, we maintain our Sell rating on the stock.

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