Shares of Raymond Lifestyle, a spinoff of the parent firm Raymond, gained 4% on Monday after domestic brokerage Motilal Oswal initiated coverage on the apparel retailer with a ‘buy’ rating. The shares last traded at ₹2,450, an increase of ₹86 or 3.7% from the previous close.
Motilal Oswal expects a 30% upside in Raymond Lifestyle from the current level by targeting ₹3,200 per share. Its revenue CAGRs and net profit CAGRs are likely to be at 11% and 15% YoY, respectively, between FY24-FY27.
“Raymond Lifestyle would benefit from leadership in the strong expansion of its branded apparel business,” Motilal Oswal’s research note. This includes plans for the doubling of exclusive brand outlets, business-to-business garment opportunities from trends in Bangladesh +1 and China +1, and the introduction of new categories such as innerwear and sleepwear. The casualisation and premiumisation of the portfolio are also likely to be key areas of focus, while sourcing efficiencies through scale will be worked on to further enhance operating leverage.
Since its listing low of ₹2,081, the stock of Raymond Lifestyle has rallied over 17%, but it still trades below its listing day close of ₹2,869 recorded on 5 September.
The company has leading men’s lifestyle brands under its portfolio, such as Raymond, Park Avenue, ColorPlus, and Ethnix. Raymond Lifestyle was demerged from Raymond with an aim to unlock value.
Motilal Oswal said, “Although the valuation of the Lifestyle business of Raymond has nearly doubled since demerger, the stock is trading at a relatively lower price-to-earnings ratio and an EV/EBITDA (pre-Ind-AS-116) of 25x and 16x on FY26E, respectively. That valuation is sharply lower than our coverage universe, as well as other retail and discretionary companies are traded at an EV/EBITDA of nearly 35-40x on FY26E.”
The research note pointed out further different strategic initiatives pursued by the Raymond Group in recent years, including the demerger of the lifestyle business, the vertical demerger of the real estate business, the restructuring of the engineering business, and the strategic sale of the FMCG business. “These initiatives have streamlined the group structure into pure-play listed lifestyle, realty, and engineering companies that have the potential to enhance shareholder value.”. Every business will be managed with professional orientation and a sharp focus on the net cash balance sheet, cost optimization, and working capital management, said Motilal Oswal.
