Saurabh Mukherjea adding this multibagger stock. Brokerages bullish too
2 min read . Updated: 04 Nov 2022, 12:00 PM IST
Premium- Brokerage Axis Securities said it adopts a wait-and-watch approach to the stock
Relaxo Footwears Ltd reported a decline of over 67% in its net profit at ₹22.4 crore for the second quarter ended September 2022 on account of volume decline and high raw material prices. The company's margin was under pressure due to high raw material prices.
“The near-term margin pressures persist on account of subdued demand environment and raw material inflation in the system as prices remained volatile. However, management’s focus on premiumisation, increasing share of fast growing sports and athleisure category, and doubling the capacity of Sparx from 50,000 pairs/day currently is step in the right direction. Nonetheless, we adopt a wait-and-watch approach to the stock with a Hold rating and a revised target price of ₹950 per share," said Axis Securities.
Well-known money manager Saurabh Mukherjea is the Founder and Chief Investment Officer (CIO) of Marcellus Investment Managers. In his recent TV interaction, he said that Marcellus' wealth management team, which has bet on Relaxo Footwear, is still going strong on the footwear stock.
“..we are very pleased to see what Relaxo has done and we do not mind taking a few quarters of profit margin drops and EPS going backwards.. We are delighted to see what Relaxo has done over the past quarter and hoping to see further consolidation in the footwear sector," Mukherjea said in an interview with ET Now.
Relaxo Footwear shares have given a multibagger return of about 6,500% since September 2009. Though, the stock is down over 29% in 2022 (YTD) so far.
“The company has taken an aggressive price correction on its product portfolio in September 2022 following the decline in RM prices. Company may have utilised majority of its higher cost RM inventory during the quarter which significantly pressurised the margins in Q2FY23 (the same has also reflected in reduction in inventory by ~| 70 crore in H1FY23). Easing RM prices could enable the company to revert back to 50%+ gross margins in the ensuing quarters," said another brokerage ICICI Securities in a note on Relaxo Footwear post Q2 results.
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