Wide Distribution Reach & Near‐Perfect
Brand Recall to Fuel Growth
Market Leader in Worsted Fabric: Raymond has a diversified and premium
product portfolio in worsted suiting segment. Ranked amongst the Top‐3
fully integrated manufacturers of worsted suitings in the world, Raymond
enjoys ~60% market share in this segment that contributes nearly half to the
Company’s total revenues
Strong Brand Positioning, Near‐Perfect Brand Recall: Raymond’s four
brands — “Raymond”, “ColorPlus”, “Park Avenue” & “Parx” — enjoy
significant market presence across semi‐premium and premium segments
from formals to semi‐formals and casuals. According to the TNS Global
Market Research brand survey, Raymond stands at top of the league with
near‐100% “spontaneous recall”.
Extensive Distribution Reach to Drive Growth: Raymond has a strong
distribution network, comprising 867 retail stores spanning a retail space of
1.7 mn square feet and over 30,000 retailers across India. It plans to add over
100 stores per year to ensure higher penetration across Tier‐IV and Tier‐V
towns in order to leverage the growing potential in branded retail segment.
Successful Turnaround to Unleash Synergies: Since FY10, Raymond
implemented a business restructuring and turnaround strategy, including
shutting down of loss‐making JVs and brands, and increased focus on supply
chain management. Company signed an agreement with the workers of its
Thane plant for VRS settlement aggregating Rs. 2.6 bn, which paved the way
for relocating its Thane plant to Jalgaon.
Thane Land Bank — Potential Valuation Upside: Raymond has the option
to sell / jointly develop its 125‐acre land at Thane valued at around Rs. 15 bn,
representing Rs. 244 per share, if monetized. However, we have not factored
the land value in our estimate, as we are not yet clear how the Company
would use the land, going forward.
Outlook & Valuations
We expect Raymond to grow by 13.2% and 18% CAGR in revenue and net
income, respectively, during FY12‐14E. At CMP of Rs. 375 per share, the
stock trades at 10.6x and 5.6x FY14E earnings and EV/EBITDA, respectively.
We initiate coverage on the stock with a “BUY” recommendation with a
target price of Rs. 494 per share, having potential upside of 32%.
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