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IndiaResearch
Textile&Apparel
January24,2014
Raymond
Bloomberg:RWIN
Reuters:RYMD.BO
RESULTREVIEW
HOLD
MaintainHOLD
Raymonds revenue, EBITDA and adjusted net income grew 15%, 45% &
127%YoYtoRs.12.08bn,Rs.1.47bn&Rs.573mn,respectivelyinQ3FY14.
RaymondsEBITDAmarginwitnessed254bpsYoYexpansionontheback
of improvement across Textiles, Apparels, Garmenting and Engineering
profitability. We believe Textiles & Apparels margin stability to be
crucialgoingforwardforsustainableperformance.
Recommendation
CMP:
Rs303
TargetPrice:
Rs320
PreviousTargetPrice
Rs295
Upside(%)
6%
StockInformation
MarketCap.(Rsbn/US$mn)
52weekHigh/Low(Rs)
409/176
3mADV(Rsmn/US$mn)
102/1.7
Beta
1.3
Textile Segment: Raymonds textile business grew 7.9% YoY to Rs. 5.43 bn
aidedbyhigherexportsand~15%YoYgrowthinMakers&Combopacks.It
also witnessed fresh demand coming from wholesale segment. EBITDA
marginroseby~200bpsYoYto21%,thusEBITDAgrew21%toRs.1.16bn.
Raymond took price hike of ~3% on fabrics during June Quarter which
helpedfurtheronimprovingmargins..
Sensex/Nifty
Branded Apparel: Branded Apparel sales grew 14.6% YoY to Rs. 2.5 bn.
EBITDAmarginsdoubledYoYto8%.EBITDAgrew117%YoYtoRs.210mn.
Raymond Premium Apparel, Park Avenue, & ColorPlus & Parx grew 25%,
4%,38%&7%YoY,respectively.SalesfromLFS&EBOsgrewby17%YoY.
Performance
21,374/6,346
Shareoutstanding(mn)
Absolute
1M
4.7
3M
12.2
Rel.toSensex
3.4
9.1
At CMP of Rs. 303, the stock trades at 10.3x and 5.8x FY15E EPS and
EV/EBITDA respectively. We revise upwards our target price to Rs. 320
(earlierRs.295)basedon6.0xFY15EEV/EBITDAandmaintainourHOLD
recommendationonthestock.
NetSales
EBITDA
EBITDAmargin(%)
PAT(Rs)
EPS(Rs)
YoYgrowth(%)
RoE(%)
RoCE(%)
P/E(x)
P/Sales(x)
EV/EBITDA(x)
FY14E
FY15E
30,359
4,096
13.5
2,544
41.4
560.5
21.1
11.3
7.3
0.6
7.5
36,424
4,536
12.5
1,558
25.4
(38.8)
12.0
12.0
12.0
0.5
7.4
40,692
3,714
9.1
577
9.4
(63.0)
4.2
7.8
32.3
0.5
8.8
45,497
4,823
10.6
1,342
21.9
132.6
9.1
10.0
13.9
0.4
7.1
50,528
5,710
11.3
1,809
29.5
34.8
10.9
11.5
10.3
0.4
5.8
Source:CompanyandKarvyInstitutionalResearch
Raymond
EarningsRevision
FY13
6.5
Jan13
Mar13
Apr13
May13
Jul13
Aug13
Sep13
Oct13
Dec13
Jan14
Sensex(LHS)
WereviseupwardsourEBITDAmarginestimatesby105bpsforFY14&51
bps for FY15 on back of strong performance from Textiles, Apparels,
Garment(exports)andEngineeringsegments.
FY12
(28.9)
400
350
300
250
200
150
Outlook&Valuation
FY11
12M YTD
(24.1)
7.6
23,500
21,500
19,500
17,500
15,500
Source:Bloomberg
Y/EMar(Rs.mn)
61
StockPerformance(%)
Denim&Shirting:RevenuefromDenim&Shirtinggrew8%&7%YoYto
Rs.1.18bn&Rs.860mn,respectivelywhilehighinputcosts&lowerexports
led to EBITDA margin decline of 128bps & ~400bps YoY to 10% & 11%
respectively.RaymondalsoreleasedpledgedequityinDenimJVbypaying
EUR8.3mnagainstsocialcostloanduringthequarter.
KeyFinancials
19/301
(%)
FY14E
FY15E
0.4
0.3
EBITDA
11.4
4.9
PAT
28.6
7.8
Sales
Source:KarvyInstitutionalResearch
AnalystsContact
RahulSingh
+914044857911
rahulsingh@karvy.com
January24,2014
Raymond
ResultReview
Raymond Q3FY14 revenuesgrew 15% YoY to Rs.12,082 mn as against our
expectations of Rs11,525mn. EBITDA margins improved 254bps YoY on lower
staffandoperationalcosts.
Interestexpensegrew8.7%YoYtoRs.524.7mn(vs.ourestimateRs.485.3mn)
whiledepreciationwashigheratRs.490.7mnvs.ourestimateofRs.485.1mn.
Reportednetprofitgrew343%YoYtoRs.569mnvs.ourestimateofRs.370
mn.TherewasanexceptionalnetoutflowofRs.3.5mn(Rs.124mninQ3FY13)
towardsVRSsettlementpayouts.ItsadjustednetprofitstoodatRs.573mnvs.
Rs.252mnincorrespondingquarter.VRSisoverwiththispayout.
DistributionNetwork:DuringQ3FY14,Raymondopened15storestoreachtotal
of 955 stores, while closing another6unviable stores. Total floorspaceincreased
by 5% YoY to 1.8 mn square feet. The Company sticks to its plan of expanding
retailpresenceby5060storesonannualbasis.
Exhibit1: VariancefromOurEarlierEstimates
Parameter
Revenue
EBITDA
EBITDAMargin(%)
NetIncome
EPS
ROCE(%)
ROE(%)
PreviousEstimates
FY14E
FY15E
45,324
50,398
4,328
5,441
9.6
10.8
1,044
1,678
17.0
27.3
8.6
10.9
7.1
10.4
RevisedEstimates
FY14E
FY15E
45,497
50,528
4,823
5,710
10.6
11.3
1,342
1,809
21.9
29.5
10.0
11.5
9.1
10.9
Variance(%)
FY14E
FY15E
0.4
0.3
11.4
4.9
105bps
51bps
28.6
7.8
28.6
7.8
1.4
0.6
1.9
0.6
Source:Company,KarvyInstitutionalResearch
ManagementsView:
Management is confident on sustaining operational profitability in Apparel post
streamliningeffortsondistribution&manufacturingchannels.BrandedTextilesis
witnessingfreshdemandfromwholesalechannelwhichweremutedfrompast3
4 quarters while makers and combopacks are growing healthy (1415% YoY) in
PW segment. Garmenting business looks promising with healthy orderbook;
operating on full capacities and capex is inline with demand. The Company is
stabilizingitsDenim&Shirtingbusinesswithstrongerdistributionbothdomestic
& exports market. Engineering business too appears promising. We remain
cautious on revenue growth going forward on subdued domestic demand with
discretionarynatureofproducts.
The Company met several developers for viable options to unlock land value
althoughtherearenosuchdevelopmentstodiscussfurther.
ChangeinRevenue&EBITDAEstimates
We largely maintain our Revenue estimates and upwardly revise our EBITDA
margin estimate by 50 bps to 100 bps across Textiles, Garmenting, Denim &
Shirting, Tools and Auto Components division while in Apparels revision is
higherat300bps&100bpsforFY14E&FY15Erespectively.
January24,2014
Raymond
Exhibit2: QuarterlyPerformance
(RsMn)
NetSales
10,527
12,267
12,082
(1.5)
14.8
OperatingCosts
9,517
10,369
10,615
2.4
11.5
EBIDTA
1,010
1,898
1,466
(22.7)
45.2
EBIDTAMargin(%)
9.6
15.5
12.1
(333bps)
254bps
OtherIncome
204
150
174
16.4
(14.6)
Interest
494
483
525
8.7
6.1
Depreciation
494
486
491
0.9
(0.6)
(42.0)
176.8
(56.3)
129.0
ProfitBeforeTax&ExceptionalItems
ExceptionalItems*
Tax
TaxRate(%)
226
1,078
625
(124)
(11)
(4)
34
179
78
15.1
16.6
12.5
Rep.PAT
128
923
569
(38.3)
343.1
Adj.PAT
252
933
573
(38.7)
126.9
Source:Company,KarvyInstitutionalResearch,*VRSPayments
Exhibit3: SegmentwisePerformance
(RsMn)
Q3FY13
Q2FY14
Q3FY14
QoQ(%)
YoY(%)
Revenue
Textile
5,033
5,587
5,433
(2.8)
7.9
Denim&Shirting
1,482
1,782
2,028
13.8
36.9
Apparel
2,185
2,544
2,503
(1.6)
14.6
Garmenting
721
1,177
1,045
(11.2)
44.8
Tools&Hardware
960
1,136
1,103
(2.9)
14.9
AutoComponents
502
506
565
11.6
12.5
727
1,266
932
(26.4)
28.2
EBIT
Textile
Denim&Shirting
92
93
110
18.7
19.7
Apparel
22
136
155
14.4
593.8
Garmenting
72
121
126
4.3
75.7
Tools&Hardware
46
129
94
(27.0)
103.2
AutoComponents
37
40
EBITMargin(%)
6.2
421.1
Bps
Bps
14.4
22.7
17.1
(551)
271
Denim&Shirting
6.2
5.2
5.4
22
(78)
Apparel
1.0
5.3
6.2
87
518
10.0
10.3
12.1
180
212
Tools&Hardware
4.8
11.3
8.5
(281)
370
AutoComponents
1.5
7.4
7.0
(36)
550
Textile
Garmenting
Source:Company,KarvyInstitutionalResearch
January24,2014
Raymond
Financials(Consolidated)
Exhibit4: Profit&lossstatement
Y/EMar(Rsmn)
Netrevenues
%Growth
RawMaterial
Staff
OperatingExpenses
Operatingexpenses
EBIDTA
%Growth
EBIDTAmargin(%)
Otherincome
Interest
Depreciation
ProfitBeforeTax
Provisionfortax
Effectivetaxrate(%)
AdjustedNetProfit
%Growth
ReportedNetProfit
FY11
FY12
FY13
FY14E
FY15E
30,359
36,424
40,692
45,497
50,528
21.1
20.0
11.7
11.8
11.1
10,148
13,335
15,808
17,516
19,201
4,557
4,754
5,533
6,074
6,695
11,558
13,800
15,637
17,084
18,923
26,264
31,888
36,978
40,675
44,819
4,096
4,536
3,714
4,823
5,710
63.3
10.8
(18.1)
29.9
18.4
13.5
12.5
9.1
10.6
11.3
742
817
739
575
575
1,240
1,651
1,906
1,946
1,958
1,608
1,658
1,890
1,958
2,071
1,989
2,044
656
1,494
2,255
(443)
614
249
269
564
(22.3)
30.0
38.0
18.0
25.0
2,544
1,558
577
1,342
1,809
560.5
(38.8)
(63.0)
132.6
34.8
538
1,558
287
1,228
1,809
Source:Company,KarvyInstitutionalResearch
Exhibit5: BalanceSheet
Y/EMar(Rsmn)
Equitycapital
Reserves&surplus
Shareholdersfunds
ShorttermLoans
LongTermLoans
TotalLoans
Deferredtaxliability
TotalLiabilitiesandEquity
Grossblock
Depreciation
Netblock
CapitalWIP
Goodwill
OtherNoncurrentAssets
Investments
Inventory
Debtors
Cash&BankBalance
CurrentAssets
SundryCreditors
Othercurrentliabilities
CurrentLiabilities
Netcurrentassets
TotalAssets
FY11
FY12
FY13
FY14E
FY15E
614
614
614
614
614
11,588
12,278
13,010
13,764
13,175
13,912
14,331
15,668
16,033
17,400
5,108
11,226
8,627
10,673
9,367
9,317
9,817
10,417
10,017
9,917
16,333
(297)
28,314
19,300
(20)
33,044
18,684
(6)
32,590
20,234
3
35,905
19,934
3
37,336
25,013
26,894
27,696
29,890
31,480
11,979
12,624
13,206
13,345
14,474
12,945
16,432
13,457
18,503
12,976
1,235
261
1,260
137
2,480
1,743
122
2,739
1,050
122
2,876
1,260
122
2,876
1,336
7,653
962
9,171
1,114
9,477
1,082
10,919
1,082
12,127
5,087
479
6,352
339
7,384
381
8,417
553
9,095
1,199
20,338
4,405
21,634
4,174
22,972
5,246
25,972
4,777
28,591
6,190
3,073
7,478
2,600
6,774
3,798
9,045
3,878
8,655
3,381
9,571
12,859
28,314
14,860
33,044
13,928
32,590
17,317
35,905
19,020
37,336
Source:Company,KarvyInstitutionalResearch
January24,2014
Raymond
Exhibit6: CashFlowStatement
Y/EMar(Rsmn)
EBIT
(Inc.)/Decinworkingcapital
Cashflowfromoperations
Otherincome
Depreciation
Interestpaid()
Taxpaid()
Dividendspaid()
DeferredTaxLiability
Extraordinaries
Netcashfromoperations
Capitalexpenditure()
Exceptionals
Netcashaftercapex
Inc./(Dec.)inshorttermborrowing
Inc./(dec.)inlongtermborrowing
(Inc.)/Dec.ininvestments
Equityissue/(Buyback)
CashfromFinancialActivities
Others
Openingcash
Closingcash
Changeincash
FY11
FY12
FY13
FY14E
FY15E
2,488
2,878
1,824
2,865
3,638
(1,550)
938
(1,678)
1,200
979
2,803
(3,196)
(331)
(1,057)
2,582
742
1,608
817
1,658
739
1,890
575
1,958
575
2,071
(1,240)
443
(1,651)
(614)
(1,906)
(249)
(1,946)
(269)
(1,958)
(564)
(71)
(509)
170
2,080
(178)
277
140
1,649
(71)
14
155
3,374
(71)
9
147
72
(107)
147
2,746
(721)
(1,850)
(1,337)
(1,777)
(1,800)
(2,052)
(693)
(200)
(290)
1,748
(115)
(1,820)
946
937
(1,524)
3,519
(553)
740
(1,356)
450
1,100
200
(500)
1,302
(9)
705
(89)
52
2,930
(157)
(2)
(775)
10
569
2,129
(300)
(240)
707
(2,869)
479
(931)
339
(138)
381
553
479
(228)
339
(139)
381
42
553
172
1,199
646
Source:Company,KarvyInstitutionalResearch
Exhibit7: KeyRatios
Y/EMar
FY11
FY12
FY13
FY14E
FY15E
RawMaterialCost/Sales(%)
33.4
36.6
38.8
38.5
38.0
ManpowerCost/Sales(%)
15.0
13.1
13.6
13.4
13.3
Operating&Othercost/Sales(%)
38.1
37.9
38.4
37.6
37.5
RevenueGrowth(%)
21.1
20.0
11.7
11.8
11.1
EBIDTAMargins(%)
13.5
12.5
9.1
10.6
11.3
NetIncomeMargins(%)
8.4
4.3
1.4
3.0
3.6
Adj.ROCE(%)
11.3
12.0
7.8
10.0
11.5
ROE(%)
21.1
12.0
4.2
9.1
10.9
Source:Company,KarvyInstitutionalResearch
Exhibit8: ValuationParameters
Y/EMar
FY11
FY12
FY13
FY14E
FY15E
EPS(Rs)
41.4
25.4
9.4
21.9
29.5
P/E(x)
7.3
12.0
32.3
13.9
10.3
BV(Rs)
200.0
224.2
226.7
255.3
283.5
P/BV(x)
1.5
1.4
1.3
1.2
1.1
EV/EBIDTA(x)
7.5
7.4
8.8
7.1
5.8
Fixedassetsturnoverratio(x)
2.3
2.8
3.1
3.4
3.8
Debt/Equity(x)
1.29
1.38
1.32
1.26
1.08
EV/Sales(x)
1.0
0.9
0.8
0.8
0.7
Source:Company,KarvyInstitutionalResearch
InstitutionalEquitiesTeam
RangachariMuralikrishnan
HeadInstitutionalEquities /
Research/Strategy
+912261844301
muralikrishnan@karvy.com
K.AnantRao
HeadSalesTrading&Derivatives
+912261844303
k.anantrao@karvy.com
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Analysts
Industry/Sector
DeskPhone
EmailID
AmeyChalke
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+912261844325
amey.chalke@karvy.com
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DerivativesandQuantAssociate
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Banking
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hatim.broachwala@karvy.com
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Economist
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Automobiles
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+912261844311
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RahulSharma
Pharmaceuticals
+912261844310
rahul.sharma@karvy.com
RahulSingh
Textiles
+914044857911
rahulsingh@karvy.com
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StockRatings
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AbsoluteReturns
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DisclosuresAppendix
Analystcertification
The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed herein
accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their)
compensationwas,isorwillbedirectlyorindirectlyrelatedtothespecificrecommendation(s)orviewscontainedinthis
researchreport.
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