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Gearing for festive season…Maintain ‘BUY’
Raymond Q2FY13 consolidated revenue grew 14% to Rs. 11,150.7 mn while
adjusted net profit was at 59.8 mn (adj. for VRS payments). The Company
reported net profit of Rs. 50.3 mn. We expect better traction for H2FY13 on
back of positive festive season along with strong marriage season ahead.
Textile Segment (worsted fabric): Raymond’s flagship business grew 11%
YoY to Rs. 5,520 mn in Q2FY13 with realization growth of 9‐10% and almost
flat volumes from domestic markets. ‘Makers’ brand contributed Rs. 470 mn
to the top‐line. EBITDA margin decreased by 1% YoY to 23% due to higher
raw material prices, while EBITDA grew 3% to Rs. 1,250 mn. Wool prices are
on declining trend but benefits would likely be coming from Q4FY13
onwards, to ease on input cost pressure.
Branded Apparel: Branded Apparel sales grew 4% to Rs. 2,280 mn, while
EBITDA slipped by 46% YoY to Rs. 220 mn. However on QoQ basis, margins
improved at 10% over loss in Q1FY13. There has been a continuous effort to
liquidate old inventory, decreased by 21 days during Q2FY13. There was also
an inventory write‐off of Rs. 50 mn. Management indicated one more
discount season (January) to fully liquidate old stock.
Denim & Cotton Shirt: Revenue from Denim and Cotton Shirt business grew
2% and 41% to Rs. 975 mn and Rs. 495 mn respectively. Lower cotton prices
and higher exports pushed EBITDA growth to 33% and 63% to Rs. 130 mn
and 60 mn respectively.
Files and Auto Component: Files reported top‐line growth of 14% at Rs. 930
mn with some margin compression due to higher exports while Auto
Component revenue declined by 19% to Rs. 310 mn with around 300 bps
margin contraction, owing to seasonality of the business.
Distribution Network: The Company is focused to add 100+ stores in a year.
During the quarter, it added 42 stores to take a tally to 902 stores. The
Company also closed 7 stores, in order to keep away with non‐performing
ones. Like‐to‐like sales growth was at 3% during Q2FY13.
Outlook & Valuation: We believe that the company will register 12.5% and
13.9% revenue growth in FY13E and FY14E respectively. We expect the Adj.
net income to grow by 2.8% and 35.3% in FY13E and FY14E respectively. At
CMP of Rs.376, the stock trades at 14.4x of FY13E and 10.7x of FY14E
earnings. We maintain our “BUY” recommendation and target price of Rs.
494, which has a potential upside of 32%.
Gearing for festive season…Maintain ‘BUY’
Raymond Q2FY13 consolidated revenue grew 14% to Rs. 11,150.7 mn while
adjusted net profit was at 59.8 mn (adj. for VRS payments). The Company
reported net profit of Rs. 50.3 mn. We expect better traction for H2FY13 on
back of positive festive season along with strong marriage season ahead.
Textile Segment (worsted fabric): Raymond’s flagship business grew 11%
YoY to Rs. 5,520 mn in Q2FY13 with realization growth of 9‐10% and almost
flat volumes from domestic markets. ‘Makers’ brand contributed Rs. 470 mn
to the top‐line. EBITDA margin decreased by 1% YoY to 23% due to higher
raw material prices, while EBITDA grew 3% to Rs. 1,250 mn. Wool prices are
on declining trend but benefits would likely be coming from Q4FY13
onwards, to ease on input cost pressure.
Branded Apparel: Branded Apparel sales grew 4% to Rs. 2,280 mn, while
EBITDA slipped by 46% YoY to Rs. 220 mn. However on QoQ basis, margins
improved at 10% over loss in Q1FY13. There has been a continuous effort to
liquidate old inventory, decreased by 21 days during Q2FY13. There was also
an inventory write‐off of Rs. 50 mn. Management indicated one more
discount season (January) to fully liquidate old stock.
Denim & Cotton Shirt: Revenue from Denim and Cotton Shirt business grew
2% and 41% to Rs. 975 mn and Rs. 495 mn respectively. Lower cotton prices
and higher exports pushed EBITDA growth to 33% and 63% to Rs. 130 mn
and 60 mn respectively.
Files and Auto Component: Files reported top‐line growth of 14% at Rs. 930
mn with some margin compression due to higher exports while Auto
Component revenue declined by 19% to Rs. 310 mn with around 300 bps
margin contraction, owing to seasonality of the business.
Distribution Network: The Company is focused to add 100+ stores in a year.
During the quarter, it added 42 stores to take a tally to 902 stores. The
Company also closed 7 stores, in order to keep away with non‐performing
ones. Like‐to‐like sales growth was at 3% during Q2FY13.
Outlook & Valuation: We believe that the company will register 12.5% and
13.9% revenue growth in FY13E and FY14E respectively. We expect the Adj.
net income to grow by 2.8% and 35.3% in FY13E and FY14E respectively. At
CMP of Rs.376, the stock trades at 14.4x of FY13E and 10.7x of FY14E
earnings. We maintain our “BUY” recommendation and target price of Rs.
494, which has a potential upside of 32%.
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