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Axis Securities Report
Relaxo Footwear Ltd.'s performance in Q2 FY23 was a miss on all three fronts of revenue, Ebtida and profit after tax vis-a- vis ours and consensus estimates. This was on account of-
weak demand in mass open footwear and
high cost raw material inventory.
Revenue for Q2 FY23 stood at Rs 670 crore, down 6% YoY (volume down 15% to 3.9 crore pairs). The management commented that high inflation in rural India impacted the demand. However, premium and closed footwear (20% of volume) continued to remain strong.
Volatilty in key raw material prices – (ethyl vinyl acetate, rubber), high cost raw material inventory and price reduction (15-20%) in september 2022 led to gross margin decline of ~590 bps YoY to 48.9%.
Relaxo's Ebitda margins stood at 8.9%, down ~750 bps YoY owing to subdued gross margins and negative operating leverage. It reported profit after tax of Rs 22 crore (down 58% YoY).
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