Relaxo Footwears Q3 Results Review - Soft Revenue; Raw Material Cool Off Pushes PAT Growth: Motilal Oswal

Motilal Oswal Report

Relaxo Footwears Ltd.'s posted a soft 5% YoY revenue growth, but improvement in gross margin and controlled cost translated into 21%/28% YoY growth in Ebitda/profit after tax (in line). Price cuts taken in the last couple of quarters have improved its competitive edge, driving a steep 15% volume growth YoY.

Relaxo’s volume growth, led by price reduction, softening raw material prices, and renewed focus on sports footwear should bolster the growth outlook.

We have cut our estimates on the current weak macro environment and slow recovery, building revenue/profit after tax compound annual growth rate of 15%/34% over FY24-26.

The stock is trading at 56 times FY26E price earning and appears expensive in a soft earnings environment.

We reiterate our 'Neutral' stance on the stock.

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