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Relaxo Footwear: CMP: 836 9M_fy_24 Result updated
(No of Pairs grew by 22% yet sales growth of just 5% due to challenging environment in whole Footwear industry)
Relaxo Footwears Limited is an Indian multinational footwear manufacturer. The company is the largest footwear manufacturer in India in terms of volume and second-largest in terms of revenue. The company makes products under 10 brands including Flite, Sparx, Bahamas and Schoolmate. They launched their brand in 1976 and since then we saw the strong growth and have good market share. Came with the IPO in 1994 to set up the plant in Haryana. Turnover that time was 38 Cr. During the year 2000 we saw the sales crossing the landmark 100 Cr, to be exact it was 125 Cr. Profits were 8 Cr. Price was around 50. Till fy_2021 PreCovid we saw strong growth in no of Pairs as we saw pairs growing from 5 Cr during year fy_2006 to 19 cr Pairs during fy_2021. This helped the sales grow to 2400 Cr and profits of 292 Cr. Today they have 387 Exclusive brand Outlet exporting in 30 Countries. 8 Manufacturing Facilities with 10 Lakh Pairs per day capacity.
Post Covid: We saw the demand getting muted post Covid and for the last 2 years no of pairs decreased from 19.1 Cr in fy_2021 to 17.5 Cr in fy_2022 and this continued last year fy_2023 with the muted demand of just 17.1 Cr. Hence for the past 2 years we have seen sales and profits struggling and hence we saw the big correction in valuations also.
9M_FY_24 Results: No pairs have seen good improvement with growth of 22% during 9M_fy24 after the long muted 2 years. This suggests that we are going to see lifetime high no of pairs this year. Yet the effect was not seen in revenue due to low average price realisation. Last year 9M average price was 163 which got lower till 148 recently.
Hence Revenue at Rs. 2,167 crores in 9M FY24, which was an increase of 7% the muted growth as compared in 9M FY23. Softening of raw material prices on Y-o-Y basis has contributed to better margins, which was partly offset by increased expenses. However this helped expand the margins by 190 basis points v/s last year. Yet, a decline of 50 basis points was seen in respect to the previous quarter Q2. This helped improve profits this year. Profit after Tax at Rs. 139 Crores in 9M FY24, up from Rs. 91 Crores in 9M FY23 reported an improvement of 53% Y-o-Y. Last year was more challenging as we saw just 5% sales growth and the profits has fallen badly by 33% due to inflation. This year the sales growth despite strong no of pairs selling would be just 5% due to low price realisation. Yet, profits would be strong with 21% Profits. This will help Relaxo reach the landmark lifetime high pairs, Lifetime high sales but Profits would be still too lesser at 187 Cr v/s 292 Cr profits in Fy_21. Yet, Correction in Price could continue which we saw from last year. All those holding since long & doing SIP can add more during the current fall near 729 while 2years targets should be assumed 1311 once the revenue is back on track.
We can expect 12-15% growth in the coming time which can take relaxo towards the landmark turnover of 10000 Cr till fy_2035. Investors can expect good growth and consistent profitability in future. Definitely a wealth creator. Relaxo is a debt free company with a highly consistent profitability history.
Still 71% shares holding is with Promoter, while 7.96% holding is MF and insurance companies. 2.82% with FPI’s. SBI MF which were already holding around 1.25 Cr shares added some 6 lakh shares more this February.
Disclosure: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMMENDATION
