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Dolat Capital Report
Relaxo Footwear Ltd.'s results were below our estimate. Revenues grew 1.3% YoY versus our estimate of 5%. However, growth is expected to accelerate with improvement in demand and favorable base. Gross margin expanded 460 basis points to 62.0% aided by lower raw material prices. However, Ebitdam contracted by 130 bps to 13.2% due to high employee costs and other expenses. Lower operating leverage due to lower revenues resulted in Ebitda contraction.
We downward revise our FY25/26E earnings per share estimates by 7.1/6.6% at Rs 10.8/13.2, owing to lower-than-expected Q1 FY25 results. However, we continue to believe that the company can deliver double-digit revenue growth on a favorable base.
Valuing the stock at 58 times FY26E we arrive at a target price of Rs 774. Given rich valuation, we maintain our ‘Sell' rating.
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