Relaxo Footwear - 4QFY2013 Result Update - 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%, mainly due 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.

Store expansion and brand revamp to drive volume: Relaxo has aggressive retail expansion plans to open 25-30 retail stores every year to expand its direct reach and brand visibility. In FY2013, the company added 27 retail outlets, which has taken the total retail outlet count to 168 at the year end. We expect that this expansion of retail outlets along with the leading celebrity endorsement of the brands will help the company in expanding its reach as well as strengthening its brand image which will eventually result in top-line addition.

Outlook and valuation: We expect Relaxo to post a revenue CAGR of 15.2% over FY2013-15E to Rs. 1,333cr with an operating margin of 11.4% in FY2015E. The PAT is expected to grow at a CAGR of 27.7% to Rs. 73cr for the same period. The stock has corrected ~25% since the start of this year and at the current market price, it is trading at attractive valuation of 9.9x FY2015E earnings. We maintain our Buy recommendation on the stock with a revised target price of Rs. 791, based on a target PE of 13x for FY2015E.

Source : Equity Bulls

Keywords