I want to understand that managment says , the competitive intensity is very high , well that was the case earlier also.
From where suddenly, the new competition is coming in ?
Debt 2023-164 cr
Can you elaborate on the promotor group transactions?
He might be playing Peter thielâs strategy here. Just to showcase the world that we are not getting economic profits and the competitive intensity is high. I might be wrong, but this seems to be a case
A monopoly usually pretends that we are in a perfect competition and no producer surplus is there.
Disc- Invested.
Abnormal volume and sudden heavy selling in last minutes of trade yesterday! Price fell as low as 840 before recovering!! is there a way to find out who sold in panic?
VLS entities sell a month before when they expect a bad qtr.
If implemented as planned this could be game changer for relaxo!
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Can it be beneficial for Relaxo, Campus and other Indian players
(Footwear Industry: Imported luxury shoe brands trip on delayed BIS nod for sourcing units, ET Retail)
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Dr. Vijay Malik analysis of Relaxo
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Friends,
After going thro the above analysis , few points stand out
- Lack of pricing power
- Heavy competition
- Slow move to Premium
etc
A few other from my notes notes:
- Promoters have increased their holdings a bit during 2023
- Next 2 yrs capex already built - current util 65% only
- Valuation staying high even through these down times.
- No of pairs sold is reducing, OPM reducing.
- My assessment of management over the few calls is that they are very reluctant on price increase (risk of losing shelf space and visibility to customer)
Am thinking what are the triggers for upside - Do any of you see any ideas or found something that can be potential for upside
Capex/Volume?
Premiumization
Any issues getting resolved e-.g. inventory, raw material, Systems implementation
Any potential for optimization/efficiency-margin improvements?
Whats the scope for growth - is it linear (based on population and geo expansion ) or any other triggers?
Thanks for your thoughts in advance.
Disclosure: Invested in parts from last 3 yrs starting from around 650 to 1000+. Avg 900. Almost flat.
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Stock trading at absurd valuations. The only trigger which can create some opportunity for Relaxo could be the BIS which has been implemented from January 1st 2024. If this standard helps to erase un organized competition from the market, i think Relaxo can gain from it. With double digit volume growth & market share gain, we might see operating leverage play.
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Shareholders of Relaxo, kindly go through the concall transcripts published on 11 Novâ24. excerpts below:
Ramesh Kumar Dua - Chairman and Managing Director
Gaurav Kumaar Dua - Whole Time Director
Sachee Trivedi - Trident Capital Investments
Sachee Trivedi: My question is slightly more longer-term oriented. Now in the last 2, 3 years, we have seen 2 things happening: one is the shift of demand from open to closed footwear. And the second is a shift of demand from probably the physical channels to online channels. How did you not see this coming?
Gaurav Kumaar Dua: There were multiple factors. Like, for example, nobody saw that there will be such poor footfalls, leading to poor payments from the retailers. So itâs very difficult to really gauge how the monsoon will come up, how election will what will be the result of that. And plus a lot of unorganized players coming up because of BIS issue. Like we never thought that government will give them a leeway you can enrol after a year. So many things you cannot predict how the things will operate, how government will come with the new policies.
Sachee Trivedi: Those are like monsoon and election and BIS, I think these are very I mean, I donât think that is frankly, the crux of this. We are talking about a very structural, a very secular shift in demand from open to closed footwear. You look around yourself, thereâs I mean people are wearing shoes, those athleisure sports shoes.
And there is a very structural shift on to online. In fact, online players are having disruption from being from e-commerce to quick commerce and whatnot. So there is a massive disruption happening in channel. Given how widespread you are, given how many contact points, retail points you had, I am surprised that you did not catch on to the changes, the tectonic shift, the structural changes that are happening in the industry?
Ramesh Kumar Dua: No. As for that, thereâs a conflict of channel, general trade versus online channel. There is also too much of discounting pressure on online channel. So strategically, we are there, but we have to be very cautious of our general trade. Our multi-brand outlet, they get suffered when they see too much of discount. This year, we had to actually say no to Flipkart and Amazon because they generally give too much discount and that affects us. So we have to be very cautious in the changing scenario. Things are conflicting. Theyâre very complex also. So we are now creating separate portfolio for e-commerce. That is the thing, that in total, I mean, kind of conflicting and not complementary but sometimes totally opposite. Whatever we think about the general trade, that affects our e-commerce. And when we look for only for ecommerce,
then heavy discounting, the sale may go up, but on the long term, our general trade gets affected. So we are grappling with this issue and trying to create a separate range for ecommerce, so that this conflict should get minimized.
Gaurav Kumaar Dua: And plus, consolidation will happen. Now this year, maybe last 2 years, you can see in online, there are multiple new brands have come up in footwear. Like earlier it was 20 brands, now they are more than 200 brands in footwear. So consolidation will happen. Now discount war will be controlled, like a lot of things are happening in online, yes.
Ramesh Kumar Dua: And our two-third business is open footwear, which will never go on e-commerce. Price is low price, masses article. It is not profitable to work on e-commerce on all these masses articles.
Sachee Trivedi: So this disruption because of the online is something to be not taken likely because we are seeing industry after industry being disrupted and completely changed and transformed because of this. Do you feel that this could have a struck, I mean, given your very, very rich experience over decades, do you think this is probably the biggest challenge that you are facing now simply because a shift in nature of demand. And the channel of demand is causing and has allowed a lot many competitors, whether it is people who are coming today and selling maybe for 1 season and going away. But all of a sudden, they have the shelf space that they could never get in physical retail industry. And we are seeing in cosmetics, we are seeing in beauty products, new age players are coming up. They have gained enough critical mass and the old legacy players are really suffering in volumes. Do you think this is the kind of challenge that you are facing? And Iâm curious to hear how you place this challenge, the size of this challenge to everything you have seen in the decades of experience that you have?
Ramesh Kumar Dua: So no doubt, things are challenging. We are also mindful of the situation what is unfolding. But we have to see, we have to balance between general trade and e-commerce. In e-commerce, we canât, at the cost of general trade, promote e-commerce. E-commerce, we are mindful. We have started selling as brand as a seller where we can control our pricing also. Earlier, we were selling directly to Flipkart and other distributors, there was no price control, which was affecting our general trade. So we are building our own brand as a seller and trying to sell direct to the consumer and watchful of the situation so that we can co-exist in the general trade also and e-commerce also. And also two-third of the articles that we manufacture, they are meant for the masses. And these masses articles, they are not viable to sell on e-commerce. We have to do that business through general trade only.
Sachee Trivedi: So then 1 final question from me. Some articles, two-third of articles that you have for the masses. Now these people are probably not going online also. Why has there been no growth in this masses category over the last almost 3 years now?
Ramesh Kumar Dua: No, no. After all, market in open footwear, closed footwear is there. But in the general trade, in the 2 years, the demand has been low. And now in this year, you find a lot of unorganized, low price articles have entered the market. There is a problem of money in the hand of the masses segment at the moment, what we are witnessing. That is why they are trying to go for cheaper alternatives. But on the long-term, quality articles will also be the aim of the company and that will only help the company. We canât go for reducing the quality or do anything just for the time being.
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Relaxo is at multi year support. It is available at its Nov 2019 price.
However it is still not cheap, P/E of 74 and PEG of 26.
Net profit in 2019 was 175 cr, TTM net profit is 181.
Revenue/Sales have also not improved much 2019 it was 2292, TTM sales is 2887.
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It is more expensive now than in 2019. In 2019 it was a company that had doubled sales in the last 5 years and profit was 2.5 X in last 5 years. It was a âconsistent compounderâ with P/E of 69 factoring in similar growth over next 5 years
In 2024, it is a âlaggardâ company that has grown sales barely by 30% over 5 years with low single digit CAGR and profits are also 25% up over 5 years at low single digit CAGR. The current P/E of 60 seems exorbitant and such a laggard stock should trade at maybe 1/5th of the current P/E like in double digits. So the fall is warranted and more fall is expected
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Competitive intensity has increased in sector along with BIS certification mess is taking uncertainty a long time to resolve
Hi all,
Relaxo being a popular brand with decent numbers on P&L reports and balance sheet, what has been the reason it has just kept falling, given that Footwear growth has been 11% cagr and company is undergoing capex as well.
What were the parameters one could have seen/ saw in 2019-2020 that indicated a no-buy.
I guess answer to this will be a very good case study. Thanks
Only one I can think of is valuation and slowing growth.
This is crazy!!! I am just wondering how was this stock performing so well with this mgmt in charge before 2021!!? They absolutely donât seem to have any idea what is going on in their business!!
I may be wrong in my assumptions.
But post covid I observed significant change in village children/teens/adults physical activities.
Earlier we would always have tournaments of cricket/volleyball and other local games etc. and
I am now observing relatively childrenâs and teens mostly hooked to mobile in villages and is there prime form of entertainment.
With significantly less sports activities in teens/children.
Less damages to footware hence less sales
Itâs driving cheaper quality foot ware sales as itâs quality is ok for less rugged use
This may be anecdotal, but I am wearing same Sparx slipper for last 4 years as i am not much active and if i go for any sports I am wearing my shoes.
So in conclusion , I assume growth of every brand mostly catering to village masses footwear segment would suffer.