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  • 11 May 2023
  • ICICI Securities

RELAXO FOOTWEAR REPORTS IMPROVED OPERATIONAL PERFORMANCE DRIVEN BY HIGHER VOLUMES

RELAXO - 440 Change: 7.25 (1.68 %)

News: Revenue for Relaxo Footwear improved both on YoY and QoQ basis. The company reported positive revenue growth on YoY basis after two consecutive quarters of decline. Revenue for Q4FY23 grew by 10% YoY to Rs 765 crore (up 12% QoQ). Gross margin declined 200 bps YoY to 52.2% (53.0% in Q3F22). However, owing to positive operating leverage and lower employee expenses (down 5% YoY; decline of 170 bps YoY as % to sales to 11.2%), EBITDA margin decline was restricted by 50 bps YoY to 15.4% (Q3FY23: 10.6%). Absolute EBITDA increased 6% YoY to Rs 118 crore (Q3FY23: Rs 72.2 crore). PAT for the quarter remained flat YoY to Rs63.3 crore (up 110% QoQ). 

Views: As we await volume data, back of the envelope calculations suggests volumes to have recovered 15% QoQ to ~ 4.8 crore pairs (up 13% YoY). Average realisations are expected to have declined 4% QoQ to | 160/pair. The company had taken price corrections, which appear to have had a positive impact on volumes. EBITDA margin reverting to 15%+ after three quarters of margins in the range of 9-13% is positive. With likely exhaustion of high cost raw material inventory and expected softening of RM prices, EBITDA margins should sustain at healthy levels.

Impact: Positive