Sell Relaxo Footwears, target price Rs 850: HDFC Securities

HDFC Securities has sell call on Relaxo Footwears with a target price of Rs 850. The current market price of Relaxo Footwears is Rs 1003.5. Time period given by analyst is one year when Relaxo Footwears Ltd. price can reach defined target.

Relaxo Footwears Ltd., incorporated in the year 1984, is a Mid Cap company (having a market cap of Rs 25166.42 Crore) operating in Leather sector.

Relaxo Footwears Ltd. key Products/Revenue Segments include Footwear, Scrap, Others, Wind Power, Export Incentives and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Standalone Total Income of Rs 704.10 Crore, down -5.99 % from last quarter Total Income of Rs 748.99 Crore and down -6.69 % from last year same quarter Total Income of Rs 754.57 Crore. Company reported net profit after tax of Rs 62.93 Crore in latest quarter.

Investment Rationale
Relaxo disappointed on its Q4FY22 print. The double whammy of inflation-led pressure on consumer demand and costs is palpable. Revenue declined 6.6% YoY to INR6.98bn in Q4 (a three-year CAGR: 3%; HSIE: INR6.92bn). FY19-22 volume/net realisation CAGR stands at -2/+7% - a function of increasing skew of closed footwear in the mix. Profitability remains sub-optimal as RM inflation in key inputs remains rampant. Price hikes continue to lag RM inflation.

Promoter/FII Holdings
Promoters held 70.78 per cent stake in the company as of 31-Mar-2022, while FIIs owned 3.22 per cent, DIIs 6.94 per cent.