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Dolat Capital Report
Relaxo Footwears Ltd.'s revenues declined 8.4% YoY to Rs 6.8 billion in Q3 FY23 – came in line with our estimate. Price decline to match competition impacted sales during the quarter.
Gross margin contracted 20 basis points YoY. However, improved on sequential basis by 410 bps. The impact of high cost inventory would have phased out very fast compared to our estimate. Hence gross margin was better compared to our estimate.
Ebitda de-grew 40.6% YoY to Rs 723 million – came 12.7% ahead our estimate. Higher employee cost and other expenses led to 580 bps contraction in Ebitda margin.
As high cost inventory is completely out of system, we have increased our estimates by 8.8/2.8/2.6% for FY23/24/25E respectively. We believe that Relaxo would start reporting higher margins with new low cost inventory.
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