Thread by @Random_Gyan

My take on #Relaxo Footwears (966/-) through data and charts.

Analysis from FY96 – FY22
Sales grew at ~16%
EBITDA ~18%
NP ~17.5% (~19% till FY21)
4-5% improvement in EBITDA / EBIT / Net Profit Margins on a rolling 10 yr ending FY22 over FY06

@dmuthuk @contrarianEPS

1/N

2/N

Data from @screener_in

4-5% improvement in EBITDA flowing through led to doubling of Net Profits Margins from ~4% to ~8%. Future 4-5% improvements will only improve Net Profit Margins by 50%

3/N

While co. performance is very impressive , the stock price has run up way ahead of fundamentals to reach absurdly expensive levels

Charts for P/S , EV/ EBITDA , PE

At ~10x Sales it is significantly more expensive than most tech co. in the US.

4/N

Looking at the 20 Yr log chart. That's 30% CAGR line!! for a co. growing at 15-18% p.a. I wouldn't be surprised if it falls another 50% to 425-450 levels in next 12-18 months. It would still be trading >30x PE

5/N

Crystal ball gazing upto FY40. Continue to assume improvement in EBITDA

Even for ultra long term investor the risk reward is unattractive. Its very likely that #Relaxo will struggle to give double digit returns this decade.

Don't hold any MF which holds this at this price!