Result review: Raymond Ltd

Karvy reiterate our "BUY" recommendation and target price of Rs. 384 based on 5.8x FY15E EV/EBITDA

Provisioning Impacted EBITDA; Better Times Ahead Raymond Q4FY13 revenue and EBITDA grew 13% & 23% to Rs. 10,814 mn & Rs. 980 mn respectively while net profit declined 81% to Rs. 6 mn on eferred tax payments. During Q4FY13, Raymond has done a provisioning of Rs. 110 mn each in Shirting division on JV partner’s receivables & textile division on demerged unit, with another Rs. 150 mn inventory provisioning in Branded Apparel business for FY13. Adjusting for
provisioning, EBITDA for the quarter stood at Rs. 1,145 mn, up 44% YoY with margin expansion of 225bps.

Outlook & Valuation: We marginally upgrade revenue & EBITDA forecasts on margin recovery signs post provisioning. At CMP of Rs.290, the stock trades at 8.9x and 4.7x of FY15E EPS and EV/EBITDA respectively. We reiterate our “BUY” recommendation and target price of Rs. 384 based on 5.8x FY15E EV/EBITDA, having a potential upside of 32%.

We expect better operating environment with good recovery coming from textiles division where revenue grew 25% YoY, during Q4FY13 and Apparel business looks comfortable after cut down of inventory levels over the year from Rs. 1,050 mn to around Rs. 290mn. Going forward, we expect the Company to absorb excise duty benefits on Branded Apparel business and less compulsion to push stocks under discounts due to low inventory. This will aid margin recovery.

Source: Karvy Institutional Research