Raymond: Buy :: Business Line

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RAYMOND-Karvy

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%.

Raymond A weak performance; Inventory overhang persists: Prabhudas Lilladher

! Weak quarter despite festive season: Raymond’s performance across major
segments was extremely poor despite the festive quarter which is usually the
strongest quarter for the company. The consumer sentiment was extremely
poor through the quarter and hence, despite festivals and marriages, the offtake
remained weak.
The company reported revenues of Rs10.5bn, a 10% YoY increase and 5.6%
sequential decline. However, the major disappointment was on margins, with
EBITDA margins at 9.6% as against 16.4% in Q3FY13 and 14.3% in Q2FY13.
Reported PAT stood at Rs128.4m, 79% YoY and 75% QoQ decline. The company
incurred VRS expenses of Rs124m on retiring employees in their retail segment.

LKP LIKES : Raymond (Buy, Target Rs600)

Raymond (Buy, Target Rs.600)

Ø  Raymond is India’s most trusted apparel brand with top of the mind consumer recall across all its 4 brands – Raymond, Parx, Park Avenue & Color Plus. The Rs35bn company operates ~ 900 stores in India (80% of which is franchisee owned) due to which it has a relatively asset light business model with an asset turnover of 3x and a comfortable cash conversion cycle of ~ 115days.

Ø  The current year in our opinion is a year of consolidation for Raymond and although its 10% ROE business does not seem exciting we believe that this business could post a smart turnaround in operations next fiscal and the company has the potential to record a net profit of Rs2bn and report an EPS of Rs35

Ø  Its 125 acre land parcel in Thane in our opinion is worth Rs30bn whenever it is able to monetize the same in which case it could use the proceeds to pare down debt worth Rs10bn. The present market capitalization of Rs28bn makes Raymond trading at 13xFY’13-14E earnings a good investment bet with a one-year price target of Rs600. BUY

TECHNICAL VIEW

Ø  Daily price chart suggests the formation of an ascending triangle formation, the breadth of which is close to 200 points for Raymond. This indicates that with the completion of the pattern and the breakout above 430 levels the stock could be in for a strong upside in the next year or so.

Ø  Even the larger pattern is a complex inverse Head and Shoulder which further adds support to the breakout level. It is also one of the strongest stock and is the closest in its peer group to its all time high levels (630), which indicates that it is one of the best price performers in its sector since the last 2-3 years. The rising trendline can be considered as a strong support level for the stock.

Thanks and Regards

LKP Advisory

Gearing for festive season…‘BUY’ Raymond:: Karvy

Raymond Ltd Q2 FY13 results: FinQuest

Raymond Ltd Q2 FY13 results were above our estimates both on the topline and bottom-line front. In the
quarter, company's net sales increased 13.6% Y-o-Y and 33.1% sequentially to Rs. 11.15 bn, as against
our expectations of Rs. 10.14 bn. In the quarter, the EBIDTA declined 5.3% Y-o-Y, however, increased
414.7% sequentially Rs. 1.59 bn, as against our expectations of Rs. 1.28 bn, primarily on account of
higher than expected margins in the Textile and Branded apparel business of the company. The Adjusted
PAT came in at Rs. 569.5 mn as against our expectations of Rs. 470.6 mn, primarily on account of better
than expected operating performance.

Raymond :: ShareKhan Diwali Muharat Picks 2012

Raymond is present in the fast-growing discretionary and lifestyle category of branded textiles and
apparels. With the growing income, rise in aspirations to lead a luxurious life, greater discretionary
spending and favourable demographics, the segment of branded apparels and fabrics presents a tremendous
growth opportunity and Raymond with its brands and superior distribution set-up is very well
geared to encash the same.
Raymond’s Q2FY2013 results are ahead of expectations, revenues grew by 13.0% year on year (YoY) to
Rs1,115.1 crore (ahead of our estimate of Rs861.7 crore), but the OPM declined by 349 basis points YoY
to 14.3% on account of higher input prices, which we believe will turn in the company’s favour in the
coming quarters due to a fall in the wool prices. The company added 42 stores with an increase of
61,914 square feet in the retail space during the quarter.
With the festive season upon us, we expect Raymond to post a better performance in the coming
quarters. A likely improvement in the macro environment and its positive effect on consumer sentiment
should also help the company to post a strong bottom line growth in FY2014. Any development
with regard to the Thane land in the form of either joint development or disposal would lead to value
unlocking and provide significant cash to the company. At the CMP, the stock trades at 18.5x its FY2013E
EPS (excluding the value of the Thane land parcel) of Rs20.3 and 12.8x its FY2014E EPS (excluding the
value of the Thane land parcel) of Rs29.3.

Raymond Ltd. :: Karvy research

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

Raymond-The Impregnable Brand -Prabhudas Lilladher,

Raymond-The Impregnable Brand
• Leveraging brand, strongly expanding retail presence
• Upwards trajectory post restructuring
• Moving towards and asset-light model

Raymond: Cyclical blip on secular growth story : Nomura research

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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.

BUY Raymond: Target 635 :Anand Rathi

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Closing 381 BUY Target 635
Investment Rationale
~ Strong portfolio of brands
~ Largest retail network
~ The turnaround
~ Land bank, the trigger
~ Industry outlook
Company Description
The largest integrated manufacturer of worsted fabric, Raymond
has one of the largest exclusive retail networks in textiles and
fashion in India. It is part of an eight-decade-old group, in
operation since 1925.
It has three business divisions, Textiles, Engineering and
Automobile components, with 13 plants in Maharashtra, West
Bengal, Gujarat, Madhya Pradesh and Karnataka. It has textiles
capacity of: 31m metres per annum (Chindwara, Vapi and
Jalgaon) in worsted fabric, 21.6m mpa in high-value cotton fabric
(Kolhapur), 1.7m mpa in woolen fabric (Jalgaon) and 47m mpa in
denim fabric (Yavatmal and Romania).
It has a strong wide marketing of 762 exclusive outlets, comprising
150 exclusive brand outlets and over 18,000 touch points. It
covers over 400 towns.
It is exclusively present in over 150 cities across India and
overseas especially exports to over 55 countries including the
USA, Canada, Europe, Japan and the Middle East.

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

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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.

Buy Raymond - Premium brand at a discount :: ShareKhan

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Key points
Lifestyle retailer with strong brands and powerful distribution set-up: Raymond
is present in the fast growing discretionary & lifestyle category of branded textiles
and apparels. With the growing income, rise in aspirations to lead a luxurious life,
greater discretionary spending and favourable demographics, the segment of branded
apparels & fabrics presents a tremendous growth opportunity and Raymond with
its brands and superior distribution set up is very well geared to encash the same.
Core business back on track: For the last four years Raymond had been struggling
with a slew of issues, namely loss in the denim business, ERP roll-out issues, forex
issues, and duplicate plant cost at Thane and Vapi. These issues have been resolved
with the closure of the loss-making businesses and an amicable settlement with
the workers. Thus the core business has stabilised. The renewed focus on power
brands and on improving its penetration in tier-2 and tier-3 cities is expected to
drive the growth in the company’s core textiles business.
Branded apparel business gains critical mass: With a bouquet of strong brands
(like Raymond, Park Avenue, Parx and ColorPlus) in its portfolio Raymond is well
placed to cash in on the discretionary consumption opportunity offered by the
favourable demographic and income profile of the Indian consumer. The top-ofmind
brand recall along with a penetration-led strategy (762 exclusive stores,
presence in around 18,000 retail touch points) would help it in gaining critical mass
in the branded apparel segment. Currenlty branded apparel contributes ~22% to
the company’s total revenue. With renewed focus and enhanced retail thrust, we
expect the share to reach ~26% in the next 3-4 years time frame.
Land bank provides additional trigger: After reaching a VRS settlement with its
employees Raymond now has 120 acre of land (previously the location of the Thane
plant) in the heart of Thane city (situated at Pokhran Road) available for
development. The company is exploring options to monetise this land either through
an outright sale or joint development. Any development with regard to land bank
monetisation would provide additional trigger for the stock.
Attractive valuations: A branded play with a strong distribution franchisee, enhanced
focus and a turnaround story with improved earnings visibility, Raymond is trading
at 9.4x its FY2013 EPS of Rs41.2. This is attractive compared to the other branded
retail plays, and does not factor the inherent strength of the brand and renewed
focus and turn around status. Thus we believe that the stock is due for a re-rating.
Further, any development with regard to the Thane land in the form of either joint
development or disposal would lead to value unlocking and provide significant cash
to the company. We initiate coverage on Raymond with a Buy rating and our SOTP
based price target for the stock is Rs530 (valuing the core business at 10.5x FY2013E
earnings +50% value for the Thane land bank parcel).

Raymond::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Strong demand growth to continue in key segments
 Both Raymond's (RW) fabric business (48% of FY11 revenue) and the branded
apparel business (25% of FY11 revenue) are set to gain from the exponential increase
in its retail presence in the recent past (added 500 stores over the past 2.5 years)
and the planned opening of 100 more stores in FY12. The management sounded
upbeat about demand in new locations (tier-3, 4, and 5 towns).
 The worsted fabric business has been able to deal very well with raw material price
hikes (~50% YoY and ~28% QoQ) by blending of RM. In the branded apparel business
RW raised prices. RW's ability to withstand such pressure without hurting margins
and clocking 24% YoY volume growth in its key segment (worsted fabric) reasserts
its brand value.
Operating efficiencies to continue in FY12
 The closure of the Thane plant resulted in significant savings in 1QFY12. These
savings will continue to accrue in the remaining quarters, increasing margins.
 The raw material prices, especially wool continue to remain at elevated levels which
continue to remain a matter of concern. However, the new wool clippings expected
in October are expected to lead to price correction.
 The company is in the process of transferring the 7 mn meters of capacity from
Thane to Jalgaon that will help the company to further accelerate its production.
Focused player with a clear business strategy
 Raymond is now concentrating only on four brands in its branded apparel segement
i.e Raymond Premium apparel, Park Avenue, Parx and Colorplus and has removed
its presence in the children wear segment.
 The company has guided for a capex of INR2b, largely towards moving of Thane
plant and machinery to Jalgaon, retail expansion and capacity expansion in the
engineering and auto component businesses and other routine capex.
 Meaningful clarity is yet to emerge on monetization of RW's land bank (120 acres)
in Thane (post shifting of its factory to Jalgaon). The management is considering all
routes of monetization including sale, partial sale and joint development.
Valuation and view
RW looks set for 20-25% growth in revenue and sustained/improving margins over the
next two years. The stock trades at 7.3x and 13.3x FY12E EV/EBITDA and PER respectively
and 6.5x and 11x FY13E EV/EBITDA and PER consensus earnings estimates respectively.

Raymond Ltd - Better times ahead ::Macquarie Research,

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Raymond Ltd
Better times ahead
Event
 We hosted Raymond (RW IN) post the 1Q’FY12 conference call. The
company has reported consolidated net sales growth of 34% YoY to Rs7.8bn
on account of robust growth in the textile (up 38%), branded apparel (up
26%), denim (up 43%) and auto components (up 29%) businesses.
Consolidated EBITDA increased 76% to Rs1bn on the back of 290bp margin
expansion.
Impact
 Domestic textile business margin expanded 662bp. Domestic textile sales
grew 44% YoY to Rs3.4bn on the back of 24% volume and 13% realization
growth. Textile EBIT grew by 479% YoY to Rs0.3bn due to a 662bp increase
in margins. Margin expansion was primarily due to superior product mix and
cost savings due to the Thane plant closure. However, a significant jump in
wool prices has hurt the margin.
 Strong performance by other businesses. Raymond’s branded apparel
sales grew 26% YoY and EBITDA margin expanded 550bp YoY to 14.9% on
the back of a strong performance from Park Avenue and other branded
apparel businesses. Other businesses also grew strongly:
 Domestic denim sales grew 48% YoY to Rs1.9bn, driven by 45%
realisation growth on the back of consumer up-trading.
 Auto components and files and tools sales grew by 29% and 20% YoY,
driven by strong volume growth.
 Management expects margin improvement, going forward. According to
the Raymond management, softening in key raw material costs such as
cotton, polyester and viscose is likely to improve its margins, going forward.
The company was also optimistic on a slight moderation in wool prices (up
~60% YoY) and all these should help improve margins in coming quarters.
 Plan to double points of sales and focus on power brands. Raymond is
increasing its retail footprints (from current 750 stores) into tier-III, IV and V
towns and is planning to add ~100 stores in FY12E. In addition, it is planning
to increase points of sales by 100% in the medium term (from the current
18,000-19,000). These initiatives should bear fruit in the next couple of years.
 Thane land monetisation could turn it cash positive. Post VRS settlement
with workers, Raymond has ~120 acres of prime land to monetize in Thane.
The company is currently exploring various options to monetise this land,
including a complete sale or part-sale of the land in phases. Going by the
current land rate in the area, land monetisation could generate Rs14-16bn of
cash and could wipe out its current net debt of ~Rs12bn fully.
Outlook
 Strong growth outlook. Raymond is on a strong growth track and most of its
business is on a strong growth track. Adjusted for the real estate business,
the core textile business is currently trading at 8-13x FY12E PER and 5-8x
EV/EBITDA, based on Bloomberg consensus.

52-week blockbuster: Raymond:: Business Line

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Textile player Raymond found itself back in the positive zone in the year gone by, having struggled with mounting competition, flat revenues and steep losses (on a consolidated basis) for two years ended FY-10. The company shut production units and streamlined its brand portfolio by scaling down those brands whose performance was not satisfactory. It renewed its focus on its core brands and plumped up its standing as one of the country's finest suiting brands.

But what injected the most life into the stock was Raymond's real estate plans. It had planned to develop 125 acres of factory land, but hit roadblocks in the form of worker unions. Raymond shelled out Rs 260 crore under a voluntary retirement scheme and the project has been restarted. This places Raymond among those textile players such as Alok Industries to sell-off or develop their vast land banks.

After a tepid growth for the first half of FY-11, revenue growth gathered pace, clocking 22 per cent in the second half of FY-11 against the same period in FY-10 on a standalone basis. The company further improved on the profit front on controls over expenditure and depreciation. On a consolidated basis, operating margins have been maintained at around 10 per cent. Net margins stand at two per cent, while the company recorded consolidated losses in FY-10.

Raymond Ltd --A turnaround story: Macquarie Research,

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Raymond Ltd
A turnaround story
Event
 Raymond is the world's third-largest worsted fabric manufacturer. With its
enviable brands in worsted suiting and strong distribution, it has a market
share of over 60%. Raymond has a strong foothold in the apparel space,
through its brands Park Avenue, Colourplus and Parx.

Nomura: BUY Raymond: upside: 55%; Target Rs470; Renewed focus on growth

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 Action
Raymond dominates the suit fabric segment (market share ~70%) in India and, in
our view, looks well positioned (after its recent restructuring) to grow business in its
core brands by opening new stores across the length and breadth of the country.
We initiate coverage with a BUY rating and price target of Rs470.
 Catalysts
Strong revenue growth driven by new store openings; margin expansion due to
re-structuring; and monetisation of real estate are potential catalysts for the stock.
Anchor themes
Discretionary spending by the Indian consumer is likely to be strong in coming
years, especially in the premium clothing segment. We look for this trend of
increased spending on luxuries to spread to the smaller cities and towns of India
(refer to our report, Playing India consumption, dated 8th July 2011).

Raymond - On a strong growth path: Macquarie Research

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Raymond Ltd
On a strong growth path
Event
 We hosted the post 3Q’FY11 Raymond (RW IN) conference call. The
company has reported consolidated net sales growth of 24% YoY to Rs8.2bn
on account of robust growth in Textile (up 20%), branded apparel (up 29%),
denim (up 28%) and files (up 47%) businesses. Consolidated EBITDA has
increased 62% to Rs1.7bn on the back of 497bp expansion in margin.