Raymond shares jump 13%, hit fresh high as Jefferies initiates coverage with ‘Buy’ call; target at Rs 2600
时间:2024-06-26 16:26:39 阅读(143)
Shares of Raymond surged 13% in Tuesday’s session, hitting a fresh lifetime high of Rs 2,240 apiece, following Jefferies, a foreign brokerage, beginning its coverage on the stock with a ‘Buy’ recommendation. Setting a target at Rs 2,600, Jefferies expressed confidence that Raymond will showcase strong earnings growth. This growth can potentially lead to a revaluation, particularly after the demerger of its lifestyle division, said the brokerage.Raymond’s Business Landscape
The company’s flagship branded textiles business, accounting for 49% of its FY23 EBITDA, remains robust. Backed by an expansive network of 20,000 retail touchpoints, it’s set for single-digit growth in the medium term. Meanwhile, its apparel segment, housing brands like Raymond, Park Avenue, and ColorPlus, contributes 10% to the EBITDA. Sold via over 1,400 outlets and through wholesale distribution, this segment is tipped for double-digit growth in the coming years, added the brokerage.
Raymond’s expected 13% revenue CAGR over FY23-26E, coupled with a modest margin expansion, positions it for a 16% EBITDA CAGR. The projected 24% EPS CAGR and a consolidated ROCE of over 15% make it an attractive prospect for investors. With a BUY initiation and a sum-of-the-parts (SOTP) based price target of Rs 2,600, the company is set for a re-rating, especially post the demerger of its lifestyle business, said Jefferies. However, in its best case scenario, Jefferies saw the possibility of the target price for the apparel player at Rs 3,730, an 84% upside.
Risks and Investment ThesisLike any business, Raymond isn’t without its risks. A potential slowdown in demand, a surge in key input prices, or heightened competition could weigh on the company’s performance. However, with a turnaround, especially in terms of profitability and balance sheet health, over the last three years, Raymond seems well-prepared for the challenges ahead, according to Jefferies. The company has positioned itself to leverage its strong legacy and brand equity to maximize growth. The current valuations at a discount compared to peers make Raymond a compelling buy, with a projected upside of over 30%.
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