Saurabh Mukherjea picks underperforming Tata stock to exit Relaxo

Dalal Street's top stock picker Saurabh Mukherjea has picked Tata Elxsi, a multibagger in the last five years but has been underperforming in the last year and dumped Relaxo Footwears.

In Marcellus' Rising Giants PMS portfolio, Mukherjea dropped Relaxo, saying that the recent channel checks raised market share loss concerns for the footwear company in two major categories – open footwear (specifically PU & EVA segment) and sports shoes.

"While raw material prices have since corrected and Relaxo has passed on the same to consumers, it will be an uphill task for Relaxo to recover the space ceded to competitors," Mukherjea said, adding that Relaxo has also been stepping up its focus on designs, the traction in the shoe market has so far been slow.

In the last year period, Relaxo shares have fallen around 34%.

On adding engineering research and development (ER&D) company Tata Elxsi to his portfolio, Mukherjea said it has consciously developed design as its core strength which acts as a key differentiator for the company.

"The ‘Tata’ brand name helps the company attract customers as well as employees, which is also visible in its higher offshore mix of projects vs peers," he said in a note to clients noting that the company inaugurated a new office at Thiruvananthapuram (which will house around 2,500 engineers) and a new office at Kozhikode (which will house around 1,000 engineers).

Although the shares of Tata Elxsi have corrected around 9% in the last year, the stock is up over 500% in the last five years. Brokerages, however, have mixed opinions on the multibagger stock. Trendlyne data shows that out of 11 analysts covering the stock, 5 have a hold rating and 3 buy, and another 3 sell ratings.
Marcellus' Rising Giants PMS portfolio has been underperforming, with a loss of over 22% in the last one year.

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