Relaxo Footwear - 1QFY2014 Result Review - Angel Broking

Relaxo reported strong set of numbers for 1QFY2014. The revenue for the quarter witnessed robust growth of 25.8% yoy and stood at Rs. 312cr, 9.9% higher than our expectation of Rs. 284cr. With the softening in rubber price in the quarter, the gross margin expanded considerably by 397bp yoy and came in at 55.7%.Other expenses for the quarter increased by 40.3% yoy to Rs. 101cr. Subsequently, operating margin expanded by 269bp yoy to 13.8%, against our estimate of 11.3%. Tax for the quarter stood at Rs. 11cr (32.7% of PBT). As a result, the net profit for the quarter grew by whooping 73.3% yoy to Rs. 22cr, 48.7% higher than our estimate of Rs. 15cr.

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. 772, the stock is trading at 9.4x FY2015E earnings. We maintain our Buy rating on the stock with an upward revision in target price at Rs. 982, based on a target PE of 12x for FY2015E.

Source : Equity Bulls

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