Buy Raymond Lifestyle; target of Rs 3000: Motilal Oswal

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26 Aug, 2025 12:21

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Raymond Lifestyle’s (RLL) 2Q revenue/EBITDA declined by 5%/17% YoY due to subdued discretionary demand. Higher depreciation and interest costs led to a 27% YoY decline in adjusted PAT. RLL’s net working capital (NWC) increased to 105 days (from 78 days as of Mar’24 end) as it stocked up inventory ahead of the festive and wedding season. This also led to RLL’s debt rising to INR5.7b from net cash of INR0.2b in FY24. The management expects NWC to normalize and RLL to attain net cash position by end-FY25. RLL has corrected ~30% from listing and is trading at a reasonable valuation (~25x FY26 P/E and 13x on FY26E pre-IND AS 116 EBITDA). The key near- to medium-term catalysts for re-rating are 1) growth recovery in 2H due to a higher number of wedding days and 2) RLL’s strategy of EBO expansion. Our FY25-26 revenue estimates are broadly unchanged, but we cut our FY26E EBITDA/PAT estimates by 7%/15% on weaker margin/higher interest costs. We build in a CAGR of 9-11% in revenue/EBITDA/PAT over FY24-27.

We value RLL at a PE multiple of 30x on Dec’26E, resulting in a TP of INR3,000 per share, as our earnings cut is partly offset by rollforward. Reiterate BUY.

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