Sell Relaxo Footwears, target price Rs 1050: HDFC Securities

HDFC Securities has sell call on Relaxo Footwears with a target price of Rs 1050. The current market price of Relaxo Footwears is Rs 1273.

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 31760.84 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 30-09-2021, the company reported a Standalone Total Income of Rs 721.50 Crore, up 43.61 % from last quarter Total Income of Rs 502.40 Crore and up 24.20 % from last year same quarter Total Income of Rs 580.91 Crore. Company reported net profit after tax of Rs 68.69 Crore in latest quarter.

Investment Rationale
Relaxo’s model is just what an investor looks for in discretionary plays – an unrelenting focus on delivering value, large TAM, disciplined cost structures, long premiumisation lever, and branding power to enjoy a small, absolute, but handsome percentage premium in a relatively immature ecosystem. Positives seem priced in, though. The brokerage build in sales/EBITDA/PAT CAGRs of 13/18/19% (realisation/volume CAGR: 9/4%) over FY20-24E and a 270bp rise in RoCE to 20% by FY24. It initiates with SELL rating and DCF-based TP of INR 1,050/sh (implying 55x FY24 P/E).

Promoter/FII Holdings
Promoters held 70.92 per cent stake in the company as of 30-Sep-2021, while FIIs owned 3.56 per cent, DIIs 7.17 per cent.