Relaxo Footwears shares fall 31% from 52-week high: Should you buy the dip?

Shares of Relaxo Footwears have plunged 31.58 per cent from their 52-week high, leaving investors worried about the future of their investment amid a highly volatile market.  The Relaxo Footwears stock hit a 52-week high of Rs 1,447 on November 4, 2021 and a 52 -week low of Rs 928 on May 12, 2022.

The stock traded at Rs 990 today, translating into a loss of 31.58 per cent compared to the 52-week high on BSE.

Compared to the 52-week low, the share has gained 6.68 per cent till date. Relaxo Footwears shares hit an intraday high of Rs 998.95 today against the previous close of Rs 981.30 on BSE. The large cap stock is trading higher than 20-day and 50 day moving averages but lower than 5-day, 100-day and 200-day moving averages.

Total 0.13 lakh shares of the firm changed hands amounting to a turnover of Rs 1.27 crore on BSE. The market cap of the firm stood at Rs 24,593.89 crore on BSE.

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In Q1 of the current fiscal, Relaxo posted a 24.90 per cent rise in net profit to Rs 38.67 crore for the quarter ended June 30, 2022 against net profit of Rs 30.96 crore for the period ended June 30, 2021.

Sales rose 34.20 per cent to Rs 667.15 crore in Q1 against Rs 497.13 crore in the corresponding quarter of previous fiscal. Operating profit excluding other income too climbed 30.15 per cent to Rs 86.12 crore against Rs 66.17 crore in Q1 for the quarter ended June 2021.

Here's a look at how the stock is likely to move in the future.

Centrum Broking is bullish on Relaxo Footwears after Q1 earnings.

"We maintain our bullish stance on Relaxo in the footwear industry. We expect margin pressure may sustain for one more quarter before improving back. With polymer prices cooling off sharply over the last three months, we expect gross margin improvement on a sequential basis. We maintain our earnings per share (EPS) estimates, ADD ratings and target price of Rs 1,057. We value the business at 60 times FY24E."

Manoj Dalmia, founder and director, Proficient Equities

Relaxo has been consolidating for a long time. Also, it is below 200 D EMA, which indicates a downtrend in the stock. It is better that investors stay away from the stock for a while. The target is Rs 833 in the near term. Outlook is slightly bearish considering increased inflation, falling demand in both urban and rural also the stock has moved a lot recently and there might be some profit booking.

Ravi Singhal, CEO, GCL

"As we see after rise in crude prices, margins of the company are under pressure. But from here, we think it will do better and can reach up to Rs 1,270 to Rs 1,340 with a stop loss of Rs 840. "

Ravi Singh, vice President and head of Research, Share India

"Relaxo Footwear stock is witnessing sell off since the company posted muted March quarter earnings amid higher inflationary pressure, which hampered the volumes and profitability for Relaxo. The outlook of the company is still weak and it's advisable to avoid this stock at present. The stock price may undergo more correction to touch the levels of Rs 750 in the near term."

AR Ramachandran, Co-founder & Trainer, Tips2Trades

"Even though the recent Q1FY23 earnings are excellent on a YoY basis, compared to the previous quarter, this has been a below par earnings update. Till a daily close above Rs 1,010 isn't achieved, trend looks weak and a further correction till Rs 943 or even Rs 920 is possible."