Textiles Improved while Apparel & Engineering
Dragged Profitability; Reiterate BUY
Raymond Q1FY14 revenue grew 4.3% YoY to Rs. 8,739mn, EBITDA
declined marginally by 1.4% YoY to Rs. 305mn while Adj. net loss widens
to Rs. 39.6 mn. Exceptional outflow against VRS payments was Rs. 101mn.
Reported netloss was Rs. 497mn against netloss of Rs. 350mn in Q1FY13.
Textile Segment: Raymond’s textile business grew 12.8% YoY to Rs. 3,825
mn in Q1FY14. Higher exports coupled with Makers & Combo packs aided
revenue growth. ‘Makers’ grew 40% YoY to Rs. 230 mn. Realizations growth
was at 4.5% while rest is attributable to volume. EBITDA margin improved
by 400bpsYoYto 9%, thus EBITDA grew 106% to Rs. 340 mn.
Branded Apparel: Branded Apparel sales declined 14% to Rs. 1,580 mn.
EBITDA margins were reported at ‐6% compared with 3% in the
corresponding quarter. EBITDA losses stood atRs. 100mn compared to Rs. 50
mn in Q1FY13. The segment has significantly reduced its inventory to Rs.
200mn compared to Rs. 1,200 mn a year ago. We expect Branded Apparel to
become EBITDA positive in FY14 on account of low inventory and excise
duty removal benefits. Gross margins improved 250bps on excise benefits.
Denim & Cotton Shirting: Revenue from Denim and Cotton Shirting grew
4% each to Rs. 116 mn and Rs. 365 mn respectively. Denim EBITDA margin
remained flat at 12% YoY while Cotton Shirting margin declined by 300bps
to 11% in Q1FY14 on higherinput costs and lower exports.
Garmenting: Revenue from garmenting business grew 59% to Rs. 830 mn
driven by higher exports while EBITDA margin declined 500bps YoY to 9%
on account offorex loss (Rs. 97mn) booked on the orders for coming quarters.
However, FY14 looks promising with strong order‐book.
Engineering divisions: Tools & Hardware revenue grew 5% YoY to Rs. 940
mn while EBITDA margin declined 400bps to 9% while Auto Component
division revenue grew 3% to Rs. 650 mn with 500bps margin contraction on
challenging auto industry.
Outlook & Valuation: We revise down expected EBITDA & net income on
slower margin recovery amid challenging apparel & engineering business. At
CMP of Rs.205, the stock trades at 6.3x and 4.7x of FY15E EPS and
EV/EBITDA respectively. We reiterate our “BUY” recommendation and
revise down our target price by 18% to Rs. 316 based on 6.0x FY15E
EV/EBITDA, having a potential upside of 55%.
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Dragged Profitability; Reiterate BUY
Raymond Q1FY14 revenue grew 4.3% YoY to Rs. 8,739mn, EBITDA
declined marginally by 1.4% YoY to Rs. 305mn while Adj. net loss widens
to Rs. 39.6 mn. Exceptional outflow against VRS payments was Rs. 101mn.
Reported netloss was Rs. 497mn against netloss of Rs. 350mn in Q1FY13.
Textile Segment: Raymond’s textile business grew 12.8% YoY to Rs. 3,825
mn in Q1FY14. Higher exports coupled with Makers & Combo packs aided
revenue growth. ‘Makers’ grew 40% YoY to Rs. 230 mn. Realizations growth
was at 4.5% while rest is attributable to volume. EBITDA margin improved
by 400bpsYoYto 9%, thus EBITDA grew 106% to Rs. 340 mn.
Branded Apparel: Branded Apparel sales declined 14% to Rs. 1,580 mn.
EBITDA margins were reported at ‐6% compared with 3% in the
corresponding quarter. EBITDA losses stood atRs. 100mn compared to Rs. 50
mn in Q1FY13. The segment has significantly reduced its inventory to Rs.
200mn compared to Rs. 1,200 mn a year ago. We expect Branded Apparel to
become EBITDA positive in FY14 on account of low inventory and excise
duty removal benefits. Gross margins improved 250bps on excise benefits.
Denim & Cotton Shirting: Revenue from Denim and Cotton Shirting grew
4% each to Rs. 116 mn and Rs. 365 mn respectively. Denim EBITDA margin
remained flat at 12% YoY while Cotton Shirting margin declined by 300bps
to 11% in Q1FY14 on higherinput costs and lower exports.
Garmenting: Revenue from garmenting business grew 59% to Rs. 830 mn
driven by higher exports while EBITDA margin declined 500bps YoY to 9%
on account offorex loss (Rs. 97mn) booked on the orders for coming quarters.
However, FY14 looks promising with strong order‐book.
Engineering divisions: Tools & Hardware revenue grew 5% YoY to Rs. 940
mn while EBITDA margin declined 400bps to 9% while Auto Component
division revenue grew 3% to Rs. 650 mn with 500bps margin contraction on
challenging auto industry.
Outlook & Valuation: We revise down expected EBITDA & net income on
slower margin recovery amid challenging apparel & engineering business. At
CMP of Rs.205, the stock trades at 6.3x and 4.7x of FY15E EPS and
EV/EBITDA respectively. We reiterate our “BUY” recommendation and
revise down our target price by 18% to Rs. 316 based on 6.0x FY15E
EV/EBITDA, having a potential upside of 55%.
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