Haitong Initiates 'Outperform' Coverage On Footwear Firms Campus, Relaxo, Metro; Downgrades Bata
Of the three, Haitong prefers Metro "on the back of aggressive store addition, wide portfolio of brands and lean operating model."
Haitong International Securities Group Ltd. initiated coverage on three Indian footwear companies, citing "accelerated growth" due to increasing disposable income and premiumisation.
The brokerage has initiated coverage on Relaxo Footwear Ltd., Campus Activewear Ltd., and Metro Brands Ltd. with "outperform", as the industry is expected to grow at 17.5% annually over FY22-25 versus a mere 9% annually over FY15–20.
"This will be driven by structural factors like a shift from unorganised to organised, low per capita consumption versus the global average, increasing disposable income, urbanisation, and premiumisation," the Hong Kong-based brokerage said.
Citing analysis of key players in the global footwear market, the brokerage said that the growth opportunity is immense given that in developed markets like the U.S., the largest footwear player, Nike, is still reporting growing revenue.
"Market cap CAGR for footwear players in developing countries like India and China have outpaced developed countries due to their better growth profiles," the brokerage said in a Jan. 8 note. "The sports and athleisure segment in India continues to remain under-indexed versus other countries, and the scope for its share to increase remains huge given the increasing trend of casualization and the heightened focus on health and fitness."
Haitong International, however, downgraded Bata India Ltd. to "neutral", citing the company's lack of focus. Sticking to the core has yielded results for companies like Crocs, it said, but Bata has "shifted from a kids brand to formal and is now positioning itself in the sneaker segment."
Of the three, Haitong prefers Metro Brands "on the back of aggressive store addition, a wide portfolio of brands (through acquisition, partnerships, and collaboration with third-party brands), and a lean operating model."
The brokerage is also optimistic on Relaxo's prospects, citing recent price cuts to aid margin and volume recovery as well as its potential to upgrade consumers from the unorganised to organised segment. Campus, too, is well placed to ride on the growth in the sports segment, along with company-led initiatives like widening reach, expanding the D2C channel, increasing focus on product design and innovation, and brand-building initiatives."