India Footwear - Organised players lacing up to higher demand - Anand Rathi

Indian footwear is treading growth path, backed by benign demographics, rising affordability, increasing incomes and evolving tastes. The organised segment is growing at over 20%, implying per capita footwear consumption at 1.9 pairs per person against 1.6 in 2008. Bata and Relaxo have undertaken massive retail expansion and branding to build pricing muscle. We initiate coverage on Relaxo and Mayur Uniquoters with BUY, and Bata with Hold.

- Footwear market growing steadily. The India footwear market, growing at over 10% annually, rivals only that of China. Per capita footwear consumption has grown to 1.87x in 2011 from 1.6x 2008. The organised segment, comprising 30-35% of the total industry, is growing at twice the industry rate.

- Retail network expansion a boon. Lacing up to the growing demand, organised players are expanding their distribution pan India. Moreover, they are increasing focus on rural areas and tier II/III cities where consumption remains high.

- Brand power to build pricing muscle: Organised players are spending as large as 5% of sales on brand building. We expect the 'brand driven' players like Relaxo,Bata, to continue to dominate sales.

- Our take. We expect Relaxo to generate higher returns as it is quoting at 50% discount to Bata. Mayur Uniquoters, a key supplier to the sector, will ride on high industry growth.

Source : Equity Bulls

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