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Growth moderation in FY13 but
company remains a solid proxy
for India’s consumption story
Action/Valuation: Maintain Buy with Increased TP of INR525
Even after we factor in the impact of a relatively muted 3Q results in our
estimates, we raise our TP to INR525 as we roll forward our estimates to
FY14. Our TP still values the core business at INR425 based on 6x
EV/EBITDA FY14E, which implies 10.1x P/E multiple, and we continue to
value land at INR100/share. The current valuation of 10.3x FY13F adj.
EPS and 7.3x FY13F EPS adjusted for land value appear quite compelling
to us. We view the current price level as an excellent entry point for a
long-term secular growth story.
Scaled back topline growth estimates for FY12-FY13 after 3Q results
We reduce our FY13 sales growth rate estimate from 11.1% to 7.1% on the
back of Q3 results and expected moderation in realization growth. We
incorporate a slowdown in the consumer sentiment on account of high inflation
in our FY12-FY13 estimates but expect growth to rebound in FY14. While we
also reduce our margin assumptions for FY12, we increase our FY13 EBITDA
margin estimate by 220 basis points as we factor in the fall in raw material price
along with the closure of unprofitable businesses like Manzoni.
Catalyst: Short-term headwinds but long-term story remains intact
We think Raymond remains a solid proxy for the Indian consumption story
where we expect consumers will upgrade to branded and higher-value
products driven by rising income and increased discretionary spending.
This trend should improve the current relatively low per capita apparel
consumption and low penetration of retail in India. Raymond, with its
range of brands, high brand recall and a solid distribution network, should
be very well positioned to benefit from rising demand, especially in tier
3/4/5 cities and towns. Reiterate Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth moderation in FY13 but
company remains a solid proxy
for India’s consumption story
Action/Valuation: Maintain Buy with Increased TP of INR525
Even after we factor in the impact of a relatively muted 3Q results in our
estimates, we raise our TP to INR525 as we roll forward our estimates to
FY14. Our TP still values the core business at INR425 based on 6x
EV/EBITDA FY14E, which implies 10.1x P/E multiple, and we continue to
value land at INR100/share. The current valuation of 10.3x FY13F adj.
EPS and 7.3x FY13F EPS adjusted for land value appear quite compelling
to us. We view the current price level as an excellent entry point for a
long-term secular growth story.
Scaled back topline growth estimates for FY12-FY13 after 3Q results
We reduce our FY13 sales growth rate estimate from 11.1% to 7.1% on the
back of Q3 results and expected moderation in realization growth. We
incorporate a slowdown in the consumer sentiment on account of high inflation
in our FY12-FY13 estimates but expect growth to rebound in FY14. While we
also reduce our margin assumptions for FY12, we increase our FY13 EBITDA
margin estimate by 220 basis points as we factor in the fall in raw material price
along with the closure of unprofitable businesses like Manzoni.
Catalyst: Short-term headwinds but long-term story remains intact
We think Raymond remains a solid proxy for the Indian consumption story
where we expect consumers will upgrade to branded and higher-value
products driven by rising income and increased discretionary spending.
This trend should improve the current relatively low per capita apparel
consumption and low penetration of retail in India. Raymond, with its
range of brands, high brand recall and a solid distribution network, should
be very well positioned to benefit from rising demand, especially in tier
3/4/5 cities and towns. Reiterate Buy.
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