Raymond Ltd 2Q: Growth momentum continues ::Macquarie Research,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Raymond Ltd
2Q: Growth momentum continues
Event
 We hosted post 2Q FY12 Raymond (RW IN) conference call. The company
has reported consolidated net sales growth of 25% YoY to Rs9.8bn on
account of robust growth in Textile (up 26%), branded apparel (up 29%),
denim (up 31%) and auto components (up 32%) businesses. Consolidated
EBITDA increased 31% to Rs1.85bn on the back of 77bp margin expansion.
Impact
 Domestic textile business margin contracted 338bp. Domestic textile
sales grew 26% YoY to Rs5.0bn on the back of 4% volume and 17%
realization growth. Textile EBIT grew by 8% YoY to Rs1.0bn due to 338bp
decline in margins. Margin contraction was primarily due to higher raw
material cost (wool), which offset the cost savings due to Thane plant closure.
 Strong performance in other segments. Raymond’s branded apparel sales
grew 29% YoY and EBITDA margin expanded 750bp YoY to 18.6% on the
back of strong growth across all brands and savings from closure of nonprofitable
brands and retail stores. EBITDA for branded apparel business
increased 112% to Rs0.4bn. Other businesses also grew strongly:
 Domestic denim sales grew 31% YoY to Rs1.9bn, driven by 33%
realisation growth and marginal decline in volumes. Margins declined
254bp due to higher input costs.
 Auto components and files and tools sales grew by 32% and 37% YoY,
respectively. Growth was driven by strong volume growth.
 Management expects margin improvement, going forward. According to
the management, softening in key raw material costs such as cotton,
polyester and viscose is likely to improve its margin, going forward. Company
was also optimistic of slight moderation in wool prices and thinks all these will
help improve margin in coming quarters.
 Volume growth should pick-up during festive season. In the 2Q, the
volume growth for the textile business came down to 4% (from 24% in 1Q).
Management is hopeful the demand will pick-up again in the current quarter
due to ongoing festivals and wedding season ahead.
 Thane land monetisation can turn it cash positive. Post VRS settlement
with workers, Raymond has ~120 acres of prime land to monetize in Thane.
Company is currently exploring various options to monetise this land,
including complete sell or part-sell the land in phases. Going by the current
land rate in the area, land monetisation can generate Rs10-13bn of cash and
can wipe out its current net debt of ~Rs13bn fully.
Outlook
 Raymond is on a strong growth track and company’s recent initiatives are
driving the improvement in profitability. Adjusted for real estate business, core
textile business is currently trading at 7-8x FY12 PER and 4-5x EV/EBITDA,
based on Bloomberg consensus.