Buy Raymond; target of Rs 480: FinQuest

FinQuest Securities is bullish on Raymond and has recommended buy rating on the stock with a target of Rs 480 in its October 26, 2012 research report.

“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.”
“In Q2FY13, Raymond Zambaiti - JV net sales increased 41% Y-o-Y and 16% sequentially to Rs. 0.79 bn while the EBIDTA increased 63% Y-o-Y to Rs. 0.12 bn. We expect the segment to continue with the robust performance on account of the increase in the capacity utilization and lower cotton yarn prices. In the quarter, Raymond UCO denim - JV net sales increased 2% Y-o-Y to Rs. 1.95 bn, however, the net sales declined 2% sequentially. The EBIDTA of the segment increased ~33% Y-o-Y and ~4% to Rs. 0.26 bn. The segment is likely to continue its robust performance on account of a good order book. In Q2 FY13, Garmenting segment net sales increased 64% Y-o-Y and 78% sequentially to Rs. 0.82 bn driven by the higher exports while the EBIDTA increased 123% Y-o-Y to Rs. 0.16 bn on account of increase in sales volume coupled with an 500 bps Y-o-Y expansion in the EBIDTA margin to 19% aided by the depreciation in the rupee vis-à-vis dollar.”
“At the CMP, Raymond is trading at an Adjusted P/E of 13.8x FY13E and 9.9x FY14E EPS of Rs. 27.0 and Rs. 37.4 respectively. Over FY12-14E, we expect the company's sales and EBIDTA to grow at CAGR of 11.8% and 13.5% to Rs. 45.45 bn and 5.9 bn respectively. Raymond is trading at an EV/EBIDTA of 6.7x FY13E. We value the company at an EV/ EBIDTA multiple of 8.0x FY13E, a ~25% discount to its historical average; we maintain a target price of Rs. 480 per share, implying a potential return of 29%. The company's ~ 125 acres Thane land could fetch Rs. 15.0 -18.75 bn (implying valuation of Rs. 244- 305 per share) at conservative land valuation of Rs 120-150 mn per acre. However we do not factor the land valuation in arriving at our target price,” says FinQuest research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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