Relaxo Footwears - Q3FY21 First Cut - ICICI Direct

(CMP: Rs. 823, MCap: Rs. 20457 crore)

Relaxo Footwears continued its journey towards reaching normalcy levels and on the back of healthy demand for slippers/open sandals (80% of product portfolio), company in Q3FY21 reported strong growth on a YoY basis. Sustained EBITDA margin expansion was the positive surprise leading to superior performance on the bottom-line front.

Q3FY21 Earnings Summary

- Revenue for the quarter increased by 12% YoY to Rs. 672.0 crore (up 17% QoQ). Owing to its strong distribution reach encompassing mainly tier II/III cities, Relaxo has witnessed better traction in revenue recovery. Also, demand for low ticket size products such as slippers/open sandals (~80% of product portfolio) has been more profound.

- Gross margins improved by 110 bps YoY to 58.9%, though down 250 bps on a sequential basis. On account of positive operating leverage and tight leash on operating overheads (employee and other expense as a % to sales declined by 44 bps and 368 bps YoY), EBITDA margins expanded significantly by 520 bps YoY to 22.1%. Absolute EBITDA grew by 46% YoY to Rs. 148.7 crore.

- Other income grew by 82% YoY to Rs. 4.0 crore (Rs. 1.7 crore pertains to lease rent waiver). On the back of robust operational performance, PAT for the quarter grew by 66% YoY to Rs. 90.1 crore.

Given the dominant presence in non-metro cities and being the market leader in value priced segment (in terms of volumes), Relaxo is well placed to further consolidate its market share. Also, better working capital management had significantly strengthened liquidity position of Relaxo with cash & investments worth Rs. 256 crore as on September 30, 2020.

We would be revisiting our estimates and coming out with a detailed update.

Shares of RELAXO FOOTWEARS LTD. was last trading in BSE at Rs.823.8 as compared to the previous close of Rs. 837.15. The total number of shares traded during the day was 6455 in over 651 trades.

The stock hit an intraday high of Rs. 850.8 and intraday low of 821.7. The net turnover during the day was Rs. 5379607.

Source : Equity Bulls

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