Raymond Lifestyle to list on bourses in September first week. Analysts decode likely valuations, business, more.

Raymond Lifestyle will likely list during the first week of September 2024, said brokerage reports post company’s analyst meet . The firm anticipates doubling its EBITDA to over ₹20 billion by FY28 and is forecasting for 12–15% sales growth in the lifestyle sector, said analysts. Raymond Lifestyle recently held a plant tour and analyst gathering at its Vapi, Gujarat facility.

The brokerage highlighted in its reports thatthe company’s development would be driven by increasing its EBO network, taking advantage of the opportunities presented by China and Bangladesh+1, expanding into new categories including sleepwear and innerwear, and growing its wedding wear business.

As a component of the corporate restructuring, Raymond split its lifestyle business off into a distinct company. Shareholders of Raymond will be given four equity shares of Raymond Lifestyle for every five shares they currently hold in Raymond. Additionally, Raymond revealed the separation of its real estate business into another company called Raymond Realty. The Raymond Group will now comprise three publicly traded entities: Lifestyle, Real Estate, and the existing entity (engineering).

Let’s review the brokerage’s analysis of the company’s business, valuations, and investment rationale.

Motilal Oswal Financial Services

The brokerage reports that Raymond has been actively engaged in selling the FMCG business, separating the Lifestyle Business, restructuring the Real Estate Business, and setting up an engineering unit post the Maini Precision (MPPL) acquisition. These actions are anticipated to generate shareholder value for each business through effective management, cash optimisation, and cost and WC optimisation.

“We estimate 6% revenue/EBITDA growth for FY24-26, led by branded apparel and garmenting segments and cashflow supported by branded textiles. FY24 ROE/ROCE figures stood at 10/32%, as per the company. We ascribe EV/EBITDA of 15x on FY26 (implied PE of 28x) to arrive at a valuation of ₹159 billion (per share price of ₹2,610),” the brokerage said.

According to the brokerage, Raymond Lifestyle is a play on the enormous potential in Indian weddings, textiles, exports, and styling. It aims for a CAGR of 12–15%/16–17% in EBITDA and sales between FY24 and FY28. CAGRs of 18–20% in its clothing and accessories businesses (~40% revenue mix) and 7-8% in its high ROCE textiles sector (~50% mix) are probably going to drive topline growth. With 400 locations, Raymond Lifestyle aspires to be 10 times larger than Ethnix, compared to FY24’s 114 outlets, which brought in ₹1 billion.

“Given ₹2 billion capex toward garmenting, the company would stand among the global top-3 in our view, with 10mn capacity. Garmenting enjoys macro tailwinds backed by diversification of global supply chains and potential FTAs. Despite faster growth in the relatively lower-margin non-textile businesses, Raymond Lifestyle sees steady margin gain, with branded apparel/garmenting scale-up. It is a netdebt free player, expected to be listed by mid Sep-24,” the brokerage said.

Antique Stock Broking Ltd

The report from the brokerage mentioned that according to its assessment, important factors to monitor would include expanding the range of branded clothing and the ethnic portfolio, as well as the performance in new product categories such as innerwear and sleepwear.

“We expect Raymond Lifestyle to deliver revenue/ EBITDA CAGR of 13%/ 15% over FY24-27E. Using SoTP-based valuation, we expect Raymond Lifestyle’s fair valuation to be ₹180 billion on FY27 estimates. The stock is expected to list in Sep’24,” said the brokerage house.

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