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Relaxo Footwear (Relaxo) reported a disappointing performance for 2QFY2012.
The company’s revenue declined by 7.3% to `200cr qoq, mainly because of
muted volume growth. Operating margin slipped by 294bp to 8.4% on a qoq
basis. On the profitability front, the company reported profit of only `4cr, a dip of
60.1% qoq, in 2QFY2012 as compared to profit of `11cr in 1QFY2012. We
expect the company to report profit of `34cr and `56cr for FY2012E and
FY2013E, respectively. We maintain our Buy recommendation on the stock and
upgrade the target price to `420, based on a target PE of 9x for FY2013E.
Top line expected to grow at a CAGR of 18%: We expect Relaxo to post top-line
growth of 18% CAGR over FY2011-13E to `950cr on the back of a 12% increase
in realization and changing revenue mix (high-value brands Sparx and Flite
contributing 60% to the company’s revenue). Also, the company launched Flite
Pu-Fashion under the Flite brand in June 2011, which is expected to add ~`50cr
to the company’s top line by FY2013E.
Outlook and valuation: We expect Relaxo to post revenue CAGR of 18% over
FY2011-13E to `950cr, aided by a 12% increase in realization. Rubber prices
have seen a decline of ~16% in the past six months, which will lead to improved
margins going ahead. PAT is expected to grow at a CAGR of 44% over FY2011-
13E to `56cr in FY2013E. At `325, Relaxo is trading at 7.0x FY2013E earnings
and P/B of 1.8x for FY2013E. We maintain our Buy recommendation on the stock
with a target price of `420, based on a target PE of 9x for FY2013E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Relaxo Footwear (Relaxo) reported a disappointing performance for 2QFY2012.
The company’s revenue declined by 7.3% to `200cr qoq, mainly because of
muted volume growth. Operating margin slipped by 294bp to 8.4% on a qoq
basis. On the profitability front, the company reported profit of only `4cr, a dip of
60.1% qoq, in 2QFY2012 as compared to profit of `11cr in 1QFY2012. We
expect the company to report profit of `34cr and `56cr for FY2012E and
FY2013E, respectively. We maintain our Buy recommendation on the stock and
upgrade the target price to `420, based on a target PE of 9x for FY2013E.
Top line expected to grow at a CAGR of 18%: We expect Relaxo to post top-line
growth of 18% CAGR over FY2011-13E to `950cr on the back of a 12% increase
in realization and changing revenue mix (high-value brands Sparx and Flite
contributing 60% to the company’s revenue). Also, the company launched Flite
Pu-Fashion under the Flite brand in June 2011, which is expected to add ~`50cr
to the company’s top line by FY2013E.
Outlook and valuation: We expect Relaxo to post revenue CAGR of 18% over
FY2011-13E to `950cr, aided by a 12% increase in realization. Rubber prices
have seen a decline of ~16% in the past six months, which will lead to improved
margins going ahead. PAT is expected to grow at a CAGR of 44% over FY2011-
13E to `56cr in FY2013E. At `325, Relaxo is trading at 7.0x FY2013E earnings
and P/B of 1.8x for FY2013E. We maintain our Buy recommendation on the stock
with a target price of `420, based on a target PE of 9x for FY2013E.
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