Raymond Lifestyle stock jumps 4% after Motilal Oswal's 'buy' rating

Revenue, profit to grow 11%, 15% CAGR between FY24 and FY27, says the brokerage

Raymond Lifestyle -- spun off from Raymond -- rose 4 per cent on Monday after domestic brokerage Motilal Oswal initiated coverage on the apparel retailer with a ‘buy’ rating. Shares last traded at Rs 2,450, up Rs 86, or 3.7 per cent over previous close.

Motilal Oswal has assigned a target price of Rs 3,200, implying a potential upside of 30 per cent from current levels. The brokerage expects Raymond Lifestyle’s revenue and net profit to grow at an annualised rate of 11 per cent and 15 per cent, respectively, between FY24 and FY27.

“We anticipate Raymond Lifestyle’s growth will be driven by fast paced growth in branded apparels through retail expansion (target to double exclusive brand outlets; capitalising on opportunities from Bangladesh +1 and China +1 trends in business-to-business garmenting; launch of new categories such as innerwear and sleepwear; increasing focus on casualisation and premiumisation of portfolio; and achieving sourcing efficiencies through scale, which could enhance operating leverage,” said Motilal Oswal in a research note.

Raymond Lifestyle’s stock has gained over 17 per cent from its post-listing low of Rs 2,081 but still trades below the listing day close of Rs 2,869 on September 5.

The company owns leading men’s lifestyle brands such as Raymond, Park Avenue, ColorPlus, and Ethnix. Raymond Lifestyle was hived off from Raymond to unlock value.

“Although the valuation of the Raymond’s Lifestyle business has almost doubled since the demerger, the stock is currently trading at a relatively lower P/E and an EV/EBITDA (pre-Ind-AS-116) of 25x and 16x on FY26E, respectively. The valuation is significantly lower than that of our coverage Universe and other retail and discretionary companies, which are valued at an EV/EBITDA of ~35-40x on FY26E,” observed Motilal Oswal.

Raymond is also in the process of spinning off its real estate business.

“Over the past few years, Raymond Group has taken several steps such as demerging the Lifestyle Business, vertical demerger of the Real Estate Business, restructuring of engineering business and strategic sale of the FMCG business. These initiatives have simplified the group structure into pure-play listed lifestyle, realty and engineering companies, which has potential to enhance shareholder value. Each business is managed by professionals, with a sharp focus on maintaining net cash balance sheet, optimising costs and managing working capital effectively,” added the research note by Motilal Oswal.