Relaxo Footwears is a growth stock to keep your eyes on
19-05-2014 • About Relaxo Footwears (
$RELAXO) • By InTwits
Relaxo Footwears is an attractive growth stock in Footwear industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Relaxo Footwears showed fast growth in the last financial year. Relaxo Footwears's revenue surged on 20.0% in FY2014. In addition to revenue Relaxo Footwears also keeps delivering EBITDA growth. It was 34.6% in FY2014
If we look for the longer period the company showed fast revenue growth of 20.6% from FY2011 to FY2014 annually. EBITDA surged on 26.9% from FY2011 to FY2014 annually.
Relaxo Footwears ($RELAXO) financials for the last 5 years
| mln. INR | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 17,599 | 6,916 | 8,647 | 10,098 | 12,123 |
|---|
| Revenue growth, % | | -60.7% | 25.0% | 16.8% | 20.0% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 916 | 723 | 968 | 1,098 | 1,478 |
|---|
| EBITDA growth, % | | -21.1% | 33.8% | 13.5% | 34.6% |
|---|
| EBITDA margin, % | 5.21% | 10.5% | 11.2% | 10.9% | 12.2% |
|---|
| Net Income | 378 | 268 | 418 | 448 | 656 |
|---|
| Net Income margin, % | 2.15% | 3.87% | 4.84% | 4.44% | 5.41% |
|---|
| |
| CAPEX | 925 | 627 | 488 | 838 | 711 |
|---|
| CAPEX/Revenue, % | 5.26% | 9.06% | 5.65% | 8.30% | 5.87% |
|---|
| Debt | 1,469 | 1,565 | 1,752 | 2,254 | 1,984 |
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| Cash | 10 | 11 | 7 | 17 | 56 |
|---|
| Net Debt/EBITDA | 1.6x | 2.1x | 1.8x | 2.0x | 1.3x |
|---|
| |
| ROIC, % | 32.4% | 17.4% | 21.2% | 19.9% | 24.1% |
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| ROE, % | 41.1% | 21.9% | 27.3% | 23.2% | 26.7% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. Relaxo Footwears showed fast EBITDA margin growth of 1.30 pp from 10.9% to 12.2% in FY2014. In the last 3 years EBITDA margin surged on 1.70 pp from 10.5% in FY2011 to 12.2% in FY2014.
We call Relaxo Footwears an attractive growth stock as together with the growth it delivers high ROIC at 24.1%. Three years ago it was lower at 17.4%. It's average level of ROIC for the last three years was 21.8%.
Relaxo Footwears's Net Income margin surged on 1 pp from 4.40% to 5.40% in FY2014. If we look for the longer period Net Income margin surged on 1.50 pp from 3.90% in FY2011 to 5.40% in FY2014.
Relaxo Footwears operates at ROE of 26.7%. It's average level of ROE for the last three years was 25.7%.
Capital expenditures (CAPEX)
To this fast growth the company had to invest in CAPEX.Relaxo Footwears's CAPEX/Revenue was 5.87% in FY2014. Relaxo Footwears's CAPEX/Revenue dropped on 3.19 pp from 9.06% in FY2011 to 5.87% in FY2014. For the last three years the average CAPEX/Revenue was 6.60%.
Leverage (Debt)
Having such a fast growth profile the company keeps medium debt level at 1.3x Net Debt/EBITDA. If we look for the longer period the company showed big decline in leverage of 0.85x from 2.15x in FY2011 to 1.30x in FY2014.
Valuation vs. comparable companies
The market closed today at 15.9x EV/EBITDA for Relaxo Footwears which is the same as 16.0x Footwear peer group avearge calculated on the basis of 14 companies. The market closed today at 32.9x P/E for Relaxo Footwears which is the same as 32.9x Footwear peer group avearge calculated on the basis of 1 company.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 30.7x EV/(EBITDA-CAPEX) for Relaxo Footwears which is 1,110% higher than 2.5x Footwear peer group avearge calculated on the basis of 1 company.
