Raymond Lifestyle lists at Rs 3,020 on NSE; locked in 5% lower circuit

Raymond is India’s largest integrated worsted suiting manufacturer that offers end-to-end solutions for fabric and garmenting.  The company has some of the leading brands within its portfolio such as Raymond Ready to Wear, Park Avenue, ColorPlus, Parx, Raymond Made to Measure and Ethnix by Raymond, among others.
Raymond has one of the largest exclusive retail networks in the country with about 1,450 stores in more than 600 towns.

Raymond had fixed July 11, 2024, as the record date for the demerger of its lifestyle business from Raymond into RLL (formerly: Raymond Consumer Care) and for determining the entitlement of the shareholders of the company.
The company had announced a share exchange ratio of 4:5, which means four shares of RLL would be allotted to shareholders for every five shares of Raymond that they held.

In the April to June quarter (Q1FY25), RLL had reported 51 per cent year-on-year (YoY) drop in its earnings before interest, tax, depreciation and amortization (Ebitda) at Rs 87 crore, compared to Rs 180 crore in Q1FY24.
Net revenue declined 8 per cent YoY to Rs 1,249 crore from Rs 1,353 crore in the year-ago quarter.

The company's management said the lifestyle business was impacted due to subdued consumer demand, prolonged heat waves, general elections, fewer wedding dates and inflation, which affected its overall revenue performance and margins. As India continues to be a preferred sourcing destination, the China-plus-one strategy is playing its part, the company's management said, while adding that Raymond is expanding its garmenting capacity by a third of its current levels. Once fully commissioned, this capacity expansion would make Raymond the third largest suit maker in the world, management noted.

Raymond, in its FY24 annual report, said the company anticipates maintaining a profitable growth trajectory. In the domestic market, consumer sentiment is expected to remain positive, driven by the approaching wedding and festive seasons and surging demand for formal and daily wear categories.
The company aims to introduce new initiatives to bolster growth during this period.

In the branded apparel segment, Raymond aims to diversify its product range through the demerger of its lifestyle business, which will facilitate new launches in its core portfolio, and emphasise casualisation and expansion of its Ethnix wear category.

The company reiterated its guidance of 12-15 per cent revenue growth and doubling of Ebitda to over Rs 2,000 crore by FY28 (that is 19 per cent CAGR) in the lifestyle business. This, along with a reduction in working capital to 60 days, should result in free-cash-flow generation of Rs 600-700 crore annually.

The management’s aspirational growth targets will be supported by the doubling of its exclusive brand outlets (EBO) network to more than 900 stores by FY27; capitalising on the Bangladesh +1, China +1 and free trade agreement (FTA) opportunities; the extension of new categories such as innerwear and sleepwear; and the wedding wear opportunity, said Motilal Oswal Financial Services in a company update.

In the past, the Raymond group has largely been viewed as a textile/apparel player.
However the analyst meet on Lifestyle 2.0 brought to light its position in the wedding wear segment and aggressive targets, implying a sizeable business going ahead (Rs 3,800 crore/Rs 5,800 crore in FY27F/30F, as per management’s 1.5x/2.3x targets, respectively, over the FY24 level of Rs 2,540 crore).
"Considering that Vedant Fashion gets a 16x FY26F EV/sales valuation for its wedding business, RLL’s valuation has the potential for an upside, above our/street estimates going ahead", analysts at InCred Equities said in an analyst meet update.