Multibagger stock jumps 1000 times to turn ₹1 lakh to ₹55 Cr after 3 bonus shares: Should you buy?
Premium- With a market valuation of ₹25,424.06 Cr, Relaxo Footwears Ltd. is a large-cap company that engages in the consumer discretionary industry
With a market valuation of ₹25,424.06 Cr, Relaxo Footwears Ltd. is a large-cap company that engages in the consumer discretionary industry. One of the leading footwear manufacturers in India is Relaxo Footwear manufactures a large selection of footwear online from well-known manufacturers like Relaxo, Sparx, Bahamas, and Flite. The largest footwear maker in India, Relaxo, is a Fortune 500 (India) firm that was founded in 1984 and is now listed among the top 500 Most Valuable Companies. After the company declared three bonus shares since its founding, lakhpati investors who initially invested ₹1 lakh in the stock should now have made ₹55 Cr, here’s how.
Share price and bonus share history of Relaxo
The shares of Relaxo Footwears Ltd. ended trading on the BSE on Tuesday at Rs. 1,021.35, up 0.76% from the day's previous close of Rs. 1013.60. In contrast to the 20-Day average volume of 210,104 shares, the stock closed Tuesday's trading session with a total volume of 98,518 shares. On the BSE, the stock had made a 52-week-high of ₹1,447.00 on (04/11/2021) and a 52-week-low of ₹928.00 on (12/05/2022), indicating that at the current market price the stock is trading 29.41% below the high and 10.05% above the low. The stock price climbed from ₹1.46 on November 12th, 1999 to the current market price, representing a staggering multibagger return of 69,855.48% over the previous 23 years. The stock has produced a multibagger return of 108.27% over the past three years and a multibagger return of 294.53% over the past five years. However, the stock has dropped 15.19% during the last year and 22.76% over the course of the year 2022 on a YTD basis.
From the initial stage of the company if an investor had invested Rs. 1lakh in this stock then he/she had got 68,493 shares of the company, which would then go up significantly after the first announcement of the bonus stock which is on 8th December 2000 in the ratio of 1:1, resulting in the share count to reach a sum of 1,36,986, this may look like profit figures, but this is actually the total shares an investor would have got. After this, the company issued bonus shares two more times both in the ratio of 1:1, the second bonus declaration of stock was on 1st July 2015 and the last one was on 26 June 2019, which made the shareholding go up to 2,73,972 and the next bonus issue made the final changes in both the shareholding and the percentage of the company held by the investor and that is 5,47,944. The resulting share count of this company gave the investors huge profit, making the investment of the initial stage climb to more than 1000 times. According to the current market price, the total share count of 5,47,944 is now worth more than Rs. 55 Crore.
Should you buy the shares of Relaxo?
On Monday, the research analysts of the broking company Sharekhan has said in their research note that “We interacted with Mr. Sushil Batra – CFO and Mr. Vikas Tak – Company Secretary, of Relaxo Footwear (Relaxo) to understand the current business environment and future growth prospects of the company. The company has undertaken corrective pricing actions to help revive sales volumes, which were affected by raw material inflation, consumer demand slowdown and a hike in the footwear GST rate to 12% from 5%. After key input prices corrected, Relaxo undertook a price cut of 12-15% in key value-for-money brands such as Relaxo, Bahamas and Flite to reduce the prices and make it competitive with unorganised players. The company expects sales volumes to gradually recover and margin pressures to ease as key input prices fall further, from Q3FY2023. Thus, FY2023 is expected to be a muted year while a strong recovery is anticipated in FY2024. The company is focusing on 4-5 key growth levers to achieve consistent volume growth of high single to low double digit in the medium term."
They further claimed that “Relaxo is well poised to achieve revenue and earnings CAGR of 14% and 22%, respectively, over FY2022-FY2025E, with key levers expected to drive consistent growth. The company has a strong, debt-free balance sheet with good cash generation ability. The stock currently trades at 80.6x/59.6x its FY2024E/FY2025E earnings. We have introduced FY2025E earnings through this note. We maintain a Buy recommendation on the stock with a revised price target (PT) of Rs. 1,185 (rolling it forward to October 2024 earnings)."
“Relaxo’s revenue reported a CAGR of ~10% with volume CAGR of 5% over FY2017-FY2022. Inflationary environment and GST rate hike on footwear below Rs. 1,000 per pair will affect the performance in the near term. However, the long-term growth prospects of the domestic footwear sector are intact. With the implementation of GST, there is a shift from unbranded to branded products, which provides further scope for the company in the Rs. 55,000 crore – Rs. 60,000 crore Indian footwear market, of which ~50% is unbranded. The management has identified 4-5 levers which are expected to drive growth for the company including higher contribution from e-commerce channel, expansion in closed footwear, increased export contribution, adoption of the EBO model and steady growth momentum maintained in the open footwear category." they further have added in their research note.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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