Issue #012 explores the recent demerger & listing of Raymond Lifestyle Limited and the opportunity it presents for quick gains. It's The Complete opportunity, Man
Assuming that the FY2028 EBITDA will be 2150 Cr which double of FY24 EBITDA (Translating to 19% CAGR growth In EBITDA), and the EV/EBITDA Multiple re-rates to 25 times which is again much lower than major peers like Vedant Fashions, ABFRL, Page Industries, etc, the stock price for FY28 comes at Rs. Rs. 8,900. This is 274% absolute returns on CMP of stock.
So, three assumtions are:
1. EBITDA Guidance will be met
2. EV EBITDA Multiple will re-rate to 25 times
3. Furthur dilution of stock doesn't take place.
I think EV EBITDA Multiple of 25 times is very conservative again because of the brand recall that Raymond has and plus it is a debt free company. So, I should trade at better valuations. Only hindrance that that come between RLL achieveing this valuation is the reputation of Mr. Singhania that public has. If people discount that thing more than the business fundamentals, stock might not re-rate beyond some level.
Good points and you've stacked a couple of safety harnesses in your note - a) a strong brand (which offers pricing support) and b) high free cash flow generative (keeps RLL debt-free & expansionary). It's hard to see any dilution at this stage.
Hello Shankar Sir, Your insights in picking such undervalued companies is top-notch! I always look forwards for your newsletter and Instantly click on the notification to read them.
I was hoping if you could guide me on how to choose such stocks so that I too can become more informed on these.
Thank you very much Satvik ji. I'm glad you like my work 🙌
On identifying such stocks (esp. the process), you might want to connect with @priyambansal .. he's new like you so he'll be a better position to explain things. If there are more enquires then Priyam can also do a group call
Hi Shankar. All of your posts are top notch and full of insights. Thanks for all your research and bringing the best out of it for us. I recently came across a potential special situation or probably a turnaround in JM Financial. Will be great if you can analyze it in the interest of the community.
The sole reason I downloaded Substack is to follow your news letter. I randomly stepped your YouTube videos and they are amazing without unwanted noise.
Looking forward for more insights from you.
Also special appreciation for your cute and witty thumbnails and graphics you use! :p
Thank you Ravi ji. Youtube & the newsletter has been a god-send for me -- an outlet for my three passions: a) teaching, b) investing and c) creativity (not in order of preference). I'm glad you are liking my work 🙌 .. appreciate the kind words
Its alwasy great to read a well reasonded and reserched analysis. I will suggest you should start a paid service.. Your efforts need to be rewarded as well. Great Work...
Yes, this newsletter will go into paid subscription mode by December. I'm already investing in it -- hired a researcher (one more needed), my time, external platform subscriptions, will start a community so that timely stock updates can be provided etc. There is now confidence that what I put out has the potential to do well
Good to hear from you frequently sir.very to the point analysis, also when I started reading I also remember bajel call as same special situation which create Raymond lifestyle ltd also. And you also mentioned after some words about RLL. Gratitude as always.any event of yours in Ahmedabad or Gandhinagar I will be happy to assist you sir.
Nice of you to connect the dots with an earlier issue on Bajel Projects, well done!
Thank you Dipenkumar ji for the offer to hosting a meetup in Ahmedabad/G'nagar. I started my career for that city so lots of good memories there, I myself used to stay at Ghatlodiya. I'll connect back if something on those lines comes up
I did some homework on RLL and was about to share that with you Shankar sir. I was really glad when I received the notification that you have come up with a new newsletter on Raymond Lifestyle. I was quite surprised and excited at the same time. Thanks a lot for this once again!
I find the appropriate way to value Raymond on relative valuation basis would be a weighted average of multiples of each of segments based on competition. However, the risk with relative valuation is if the peers get re-rated or downgraded.
While EBITDA can be found for each segment i.e. branded textiles, branded apparels, shirting & garments .. how do you assign a % of the enterprise value to each segment. Companies only give segmental revenue, profits & liabilities but no company tells investors what % of the market cap is attributable to segment 1, segment 2, segment 3 etc. and likewise what proportion of cash is assigned to each segment.
I am really intrigued now -- can you help us out with an example of such an analysis if you've done for any industry or sub-sector?
Also you should have a post on holding companies like Summit securities, KICL, Nalwa sons which are still trading at 80% discount NAV... they way I am thinking it is like buying mutual funds at 80% discount.. with SEBI Changes in delisting rules these things should trade at par with global standards
Hello. Holding companies always trade at a discount and can go as high as 90%. What is special about these stocks you've mentioned here? Is there valuation support? If there's a more detailed analysis you've done on this, please email it to hello@beginnersbuck.com .. thanks! I'm already receiving 1-2 investing thesis (often running into 3 pages) from others every week which is leading to some good discussions
The question is why should it trade at 90%, its like the DVR logic, just of instance 2 holding companies holding the same underlying like STEL Holdings (46% discount) and Summit Securities (80%) discount , part of the same RPG group holding the same underlying shares trade with 2.5x valuation arbitrage
it means that valuation of holding companies in india are arbitrary and therein lies the value unlocking opportunity.. 2 holdcos of the same promoter are trading at discount with 2.5x valuation differential.. it just random and liquidity driven
Lovely post on Raymond dear Shankar , the way mr Singhania is chasing value creation, I think the next possible step would be for him to announce a buyback, would you know what the law is post demerger on restriction of buybacks
Lovely post on Raymond dear Shankar , the way mr Singhania is chasing value creation, I think the next possible step would be for him to announce a buyback, would you know what the law is post demerger on restriction of buybacks
Hello Shankar, Thanks for this great insight, what is your view point on this stock being demerged at 1562 per share and being listed at 95+% premium at~3000. Don't you think this selling has a bit of profit booking as well on top of forced selling. Whats your opinion on this. Also don't you think being demerged at 1562 makes it have a lower value. Looking forward for you opinion. Thank You!
Hello. On ₹1,563, even while researching I struggled to find much literature/explanation on this. It felt a bit like saying the IPO price is 100 rupees & on listing day, the stock is priced at 140 rupees. Ofcourse you & I know, the business is unlikely to have changed in value by 40% over a single day. Over time, the business finds an equilibrium which can take a week or even an year
Personally, I prefer not to anchor my thoughts on the price-that-was. I like to build my investing case on an as-is position looking at valuation, revenue visibility, growth prospects etc. The post highlights the related points
How about you? Are you of the opinion that the price should thud down to around the ₹1,500 mark for it to reflect the "true" value?
Thanks for the well-researched piece. Why do you think there is forced selling? Is it basis the market cap mandate because as I see the market cap range (small, mid, large) of the new entity remains similar to original one or is it because of sectoral mandate?
It generally happens during demergers and in this case, non-promoters have a little over 50% of the shareholding. This picture will get clearer when the revised shareholding pattern comes out. As I said in the post too, I can't be certain.
The basis can be many. Market cap is just an illustration. Others can include sector -- that is also an illustration. Maybe some fund doesn't like companies where promoter holding is 49% -- again an example. Ofcourse, we don't know specifics as its proprietary information
Sunday evening, a cup of coffee and Shankar sir's substack, a perfect combination! As always beautifully written!
Thank you! If this were a Kabir ke dohe, then:
रविवार संध्या, चाय-पकोड़े की बात,
कहते कबीर, शंकर का न्यूज़लेटर पढ़ो, ज्ञान का मिले साथ।
:)
Assuming that the FY2028 EBITDA will be 2150 Cr which double of FY24 EBITDA (Translating to 19% CAGR growth In EBITDA), and the EV/EBITDA Multiple re-rates to 25 times which is again much lower than major peers like Vedant Fashions, ABFRL, Page Industries, etc, the stock price for FY28 comes at Rs. Rs. 8,900. This is 274% absolute returns on CMP of stock.
So, three assumtions are:
1. EBITDA Guidance will be met
2. EV EBITDA Multiple will re-rate to 25 times
3. Furthur dilution of stock doesn't take place.
I think EV EBITDA Multiple of 25 times is very conservative again because of the brand recall that Raymond has and plus it is a debt free company. So, I should trade at better valuations. Only hindrance that that come between RLL achieveing this valuation is the reputation of Mr. Singhania that public has. If people discount that thing more than the business fundamentals, stock might not re-rate beyond some level.
Good points and you've stacked a couple of safety harnesses in your note - a) a strong brand (which offers pricing support) and b) high free cash flow generative (keeps RLL debt-free & expansionary). It's hard to see any dilution at this stage.
Hello Shankar Sir, Your insights in picking such undervalued companies is top-notch! I always look forwards for your newsletter and Instantly click on the notification to read them.
I was hoping if you could guide me on how to choose such stocks so that I too can become more informed on these.
Always a fan of your work!
Satvik
Thank you very much Satvik ji. I'm glad you like my work 🙌
On identifying such stocks (esp. the process), you might want to connect with @priyambansal .. he's new like you so he'll be a better position to explain things. If there are more enquires then Priyam can also do a group call
Hi Shankar. All of your posts are top notch and full of insights. Thanks for all your research and bringing the best out of it for us. I recently came across a potential special situation or probably a turnaround in JM Financial. Will be great if you can analyze it in the interest of the community.
Thank you! If you have a detailed analysis of this JM Financial situation, can you email it to me at hello@beginnersbuck.com? This will help me
Sent you on email.
Thanks!
Thanks Shankar, this analysis literally make sense and today I bought some shares of Raymond Lifesyle. I know I will make good money out of it!
Thank you again :)
Glad you found it helpful. Yes, I picked some yesterday too -- expecting a strong Q2 & Q3 performance by the company
Thanks Shankar Nath!
The sole reason I downloaded Substack is to follow your news letter. I randomly stepped your YouTube videos and they are amazing without unwanted noise.
Looking forward for more insights from you.
Also special appreciation for your cute and witty thumbnails and graphics you use! :p
Thank you Ravi ji. Youtube & the newsletter has been a god-send for me -- an outlet for my three passions: a) teaching, b) investing and c) creativity (not in order of preference). I'm glad you are liking my work 🙌 .. appreciate the kind words
Its alwasy great to read a well reasonded and reserched analysis. I will suggest you should start a paid service.. Your efforts need to be rewarded as well. Great Work...
Thank you! I'm happy you liked it
Yes, this newsletter will go into paid subscription mode by December. I'm already investing in it -- hired a researcher (one more needed), my time, external platform subscriptions, will start a community so that timely stock updates can be provided etc. There is now confidence that what I put out has the potential to do well
Good to hear from you frequently sir.very to the point analysis, also when I started reading I also remember bajel call as same special situation which create Raymond lifestyle ltd also. And you also mentioned after some words about RLL. Gratitude as always.any event of yours in Ahmedabad or Gandhinagar I will be happy to assist you sir.
Nice of you to connect the dots with an earlier issue on Bajel Projects, well done!
Thank you Dipenkumar ji for the offer to hosting a meetup in Ahmedabad/G'nagar. I started my career for that city so lots of good memories there, I myself used to stay at Ghatlodiya. I'll connect back if something on those lines comes up
Very informative and insightful. Was awaiting your views on the same . Looking at accumulating as a portfolio component. Thanks.
Most welcome!
I did some homework on RLL and was about to share that with you Shankar sir. I was really glad when I received the notification that you have come up with a new newsletter on Raymond Lifestyle. I was quite surprised and excited at the same time. Thanks a lot for this once again!
Ab se hurry up 😊 .. thanks for taking the initiative!
Ha ha..Sure Sure 😁
Btw, loving your content 😊
Kudos 👏
Have a different viewpoint
1) comparison with Trent is not appropriate. completely different business models
2) Manyavir is a pure play on wedding segment and its gross margins are much higher than Raymond.
3) Raymond has in the past set ambitious targets for Lifestyle, and failed by a wide margin. There were multiple top management changes
If Trent & Vedant aren't suitable, which are the two closest competitors for Raymond Lifestyle you'll advise investors to track?
I find the appropriate way to value Raymond on relative valuation basis would be a weighted average of multiples of each of segments based on competition. However, the risk with relative valuation is if the peers get re-rated or downgraded.
While EBITDA can be found for each segment i.e. branded textiles, branded apparels, shirting & garments .. how do you assign a % of the enterprise value to each segment. Companies only give segmental revenue, profits & liabilities but no company tells investors what % of the market cap is attributable to segment 1, segment 2, segment 3 etc. and likewise what proportion of cash is assigned to each segment.
I am really intrigued now -- can you help us out with an example of such an analysis if you've done for any industry or sub-sector?
It gets very complex and hard to explain here. You can refer to prof ashwath damodaran. His website has got everything wrt valuations.
However, few approaches can be used to simplify, but there are limitations to each approach
1) Market cap to sales, (ideally EV/sales)
2) P/B, if we have segment assets and liabilities.
Yes, it is excessively complex. I'm glad it's working well for you
Personally I like keeping my investing simple
Also you should have a post on holding companies like Summit securities, KICL, Nalwa sons which are still trading at 80% discount NAV... they way I am thinking it is like buying mutual funds at 80% discount.. with SEBI Changes in delisting rules these things should trade at par with global standards
Hello. Holding companies always trade at a discount and can go as high as 90%. What is special about these stocks you've mentioned here? Is there valuation support? If there's a more detailed analysis you've done on this, please email it to hello@beginnersbuck.com .. thanks! I'm already receiving 1-2 investing thesis (often running into 3 pages) from others every week which is leading to some good discussions
The question is why should it trade at 90%, its like the DVR logic, just of instance 2 holding companies holding the same underlying like STEL Holdings (46% discount) and Summit Securities (80%) discount , part of the same RPG group holding the same underlying shares trade with 2.5x valuation arbitrage
OK, let me have a look at these. Not much is clear yet
it means that valuation of holding companies in india are arbitrary and therein lies the value unlocking opportunity.. 2 holdcos of the same promoter are trading at discount with 2.5x valuation differential.. it just random and liquidity driven
Lovely post on Raymond dear Shankar , the way mr Singhania is chasing value creation, I think the next possible step would be for him to announce a buyback, would you know what the law is post demerger on restriction of buybacks
Lovely post on Raymond dear Shankar , the way mr Singhania is chasing value creation, I think the next possible step would be for him to announce a buyback, would you know what the law is post demerger on restriction of buybacks
Thank you!
Just checking would you know if there are any restriction on buybacks?
Sorry, no idea. I'll circle back if I find something
thanks
Hello Shankar, Thanks for this great insight, what is your view point on this stock being demerged at 1562 per share and being listed at 95+% premium at~3000. Don't you think this selling has a bit of profit booking as well on top of forced selling. Whats your opinion on this. Also don't you think being demerged at 1562 makes it have a lower value. Looking forward for you opinion. Thank You!
Hello. On ₹1,563, even while researching I struggled to find much literature/explanation on this. It felt a bit like saying the IPO price is 100 rupees & on listing day, the stock is priced at 140 rupees. Ofcourse you & I know, the business is unlikely to have changed in value by 40% over a single day. Over time, the business finds an equilibrium which can take a week or even an year
Personally, I prefer not to anchor my thoughts on the price-that-was. I like to build my investing case on an as-is position looking at valuation, revenue visibility, growth prospects etc. The post highlights the related points
How about you? Are you of the opinion that the price should thud down to around the ₹1,500 mark for it to reflect the "true" value?
Thanks for the well-researched piece. Why do you think there is forced selling? Is it basis the market cap mandate because as I see the market cap range (small, mid, large) of the new entity remains similar to original one or is it because of sectoral mandate?
It generally happens during demergers and in this case, non-promoters have a little over 50% of the shareholding. This picture will get clearer when the revised shareholding pattern comes out. As I said in the post too, I can't be certain.
The basis can be many. Market cap is just an illustration. Others can include sector -- that is also an illustration. Maybe some fund doesn't like companies where promoter holding is 49% -- again an example. Ofcourse, we don't know specifics as its proprietary information