Relaxo Footwear - Q4FY2013 Result Review - Angel Broking

Relaxo reported mixed set of numbers for 4QFY2013. The revenue for the quarter grew considerably by 20.6% yoy and stood at Rs. 291cr, higher than our expectation of Rs. 275cr. However, on the operating margin front the company witnessed a contraction of 269bp on yoy basis and came in at 11.0% against out estimate of 11.8%. This contraction in operating margin is mainly attributable to the higher other expenses. Tax for the quarter stood at Rs. 8cr (38.1% of PBT). Subsequently, the profit for the quarter declined by 28.3% yoy and stood at Rs. 14cr, 27.7% lower than our estimate of Rs. 19cr.

For FY2013, the company witnessed a revenue growth of 16.8% and stood at Rs. 1,005cr, against our estimate of Rs. 989cr, on account of healthy demand for coupled with price hikes. The operating margin came in at 10.4%, slightly below our estimate of 10.6% mainly because of higher other expenses. Subsequently the profit for FY2013 stood at Rs. 45cr (12.2% higher than FY2012), against our estimate of Rs. 50cr.

We remain positive on the company with the growth triggers in place, which includes - 1) capacity expansion plan, 2) store expansion, 3) improved sales mix and 4) brand revamping. At Rs. 593, the stock is trading at 9.7x FY2015E earnings. We maintain our Buy rating on the stock with a revised target price of Rs. 736, based on a target PE of 12x for FY2015E.

Source : Equity Bulls

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