Buy Raymond; target of Rs 2600: Motilal Oswal

Motilal Oswal's research report on Raymond

Raymond is an established apparel brand in India that resonates with consumers seeking premium apparel wear. However, despite its rich heritage, the brand’s market penetration has remained significantly underexplored. Over the last two to three years, the company has revitalized its standing through strategic initiatives such as: a) strengthening the senior leadership team across various management tiers (see exhibit 1); b) committing to technological advancements and instilling financial prudence with a healthy 21% reduction in Net Working Capital (NWC) over FY19-23 and turning net cash from peak net debt of INR16b; c) undertaking a comprehensive restructuring of the group’s structure by divesting the FMCG business and announcing the demerger of lifestyle business and real estate; and d) leveraging the brand and scale in each category to drive the quality of growth. These efforts are likely to be the key growth drivers going forward. We expect consolidated revenue/PAT growth of 10%/19% over FY23-25.

Outlook

The combine value of Real estate, Engineering and Lifestyle business works out to be INR2,600/share. We initiate coverage on the stock with a BUY rating.