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Relaxo is estimated to report a 21.8% revenue CAGR, aided by a 16% CAGR in
volumes, leading to a 41.0% CAGR in net profit over FY2011-13E.
We expect the company's operating profit margin to improve by 158bp from 10.5%
in FY2011 to 12.1% in FY2013E on the back of an estimated price rise of 8% yoy
in FY2011 and increased proportion of higher-value brands such as Flite and
Sparx in the revenue mix.
Relaxo is now more focused on the branding of its high-value brands (Flite and
Sparx) and establishing its name in footwears other than Hawaii slippers. The
company has increased its advertisement expense by 55% in FY2010 from `13cr
in FY2009 to `20cr in FY2010, which is expected to result in increased RoE of
24.2% in FY2013E as compared to 19.8% in FY2011.
At `283, the stock is trading at attractive valuations of 9.3x and 6.4x for FY2012E
and FY2013E earnings, respectively. We maintain our Buy view on the stock with
a target price to `399, based on a target PE of 9x FY2013E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Relaxo is estimated to report a 21.8% revenue CAGR, aided by a 16% CAGR in
volumes, leading to a 41.0% CAGR in net profit over FY2011-13E.
We expect the company's operating profit margin to improve by 158bp from 10.5%
in FY2011 to 12.1% in FY2013E on the back of an estimated price rise of 8% yoy
in FY2011 and increased proportion of higher-value brands such as Flite and
Sparx in the revenue mix.
Relaxo is now more focused on the branding of its high-value brands (Flite and
Sparx) and establishing its name in footwears other than Hawaii slippers. The
company has increased its advertisement expense by 55% in FY2010 from `13cr
in FY2009 to `20cr in FY2010, which is expected to result in increased RoE of
24.2% in FY2013E as compared to 19.8% in FY2011.
At `283, the stock is trading at attractive valuations of 9.3x and 6.4x for FY2012E
and FY2013E earnings, respectively. We maintain our Buy view on the stock with
a target price to `399, based on a target PE of 9x FY2013E earnings.
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