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
Thanks Shankar for the timely post! I did accumulate on the next Monday after the post. And seems Mukul Agarwal added 1.18% to his bucket as well! I will add more in the coming week. Also I think the government's initiative for the textile industry might also be another positive factor.
Most welcome. I think Raymond is a long term game, but it's at a decent support price. I'm keenly awaiting Q2 results, it's likely to be good with a lot of pent-up demand from Q1FY25 showing up.
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?
This gives more assurance after your Shankar. You were first for sure 👍🏻 thanks for the insights and helping others when you can enjoy your FIRE life and vacations 😊
Summary of Market Sentiments, Economic Conditions, and Future Growth Prospects from an Investment Perspective
#1. Market Sentiments & Economic Conditions
- Indian Economy Resilience: Despite global uncertainties, India's GDP is projected at 6.5%, slightly below expectations.
- Weak Consumer Spending: Discretionary spending remains low due to high inflation and lower capital expenditure.
- Inflationary Pressures: The Consumer Price Index (CPI) remains high, with sticky food inflation affecting disposable incomes.
- Global Headwinds: Challenges like fluctuating commodity prices, supply chain disruptions, and geopolitical crises (e.g., Red Sea crisis) have impacted growth.
#2. Company Performance & Financial Health (Raymond Lifestyle Limited - Q3 FY25)
- EBITDA Decline: EBITDA at ₹221 crores, with a margin drop to 12.3% (vs. higher last year) due to upfront investments and segment mix.
- Segment-wise Performance:
- Branded Textiles: Revenue down 6% YoY (₹856 crores) due to weak demand; EBITDA margin dropped to 18% from 21.6%.
- Branded Apparel: Revenue grew 5% YoY (₹458 crores) due to new product launches; however, EBITDA margin fell to 9.6% from 13.9% due to store expansion and advertising.
- Garmenting: Strong revenue growth (₹309 crores, +18%), but margin decline (7.8% vs. 11.3%) due to freight costs and expansion costs.
- Focus on Premiumization: Expansion in premium & casual segments, including Ethnix (ethnic wear) and SleepZ (sleepwear), plus a new innerwear line (Park Avenue Innerwear).
- Retail Expansion: Opened 61 new stores (incl. 14 Ethnix stores); total retail network now 1,653 stores in 600+ cities.
- Garmenting Expansion: Plans to become the third-largest suit manufacturer globally through capacity expansion.
- Positive Order Bookings: Early trends for FY26 bookings in textile and apparel segments indicate a potential recovery in demand.
#4. Investment Considerations
- EBITDA Recovery Target: Management expects a 15% EBITDA margin in FY26, as investments in retail expansion and advertising stabilize.
- Debt-Free Status: Strong net cash position (₹61 crores), with working capital improving to 89 days.
- Market Share & Competition: While branded textiles see slow growth, new adjacent categories (Ethnix, Sleepwear, Innerwear) offer multiplier growth opportunities.
- Stock Performance Outlook: If consumer spending picks up and economic headwinds ease, FY26 could be a strong recovery year.
- High Input Costs & Freight Expenses: Geopolitical issues like the Red Sea crisis could increase supply chain costs.
- Competition in New Categories: Innerwear & Sleepwear markets are competitive; success depends on brand penetration & execution.
Final Takeaway
From an investment standpoint, Raymond Lifestyle is positioned for medium-term recovery (FY26 onwards) with premiumization, retail expansion, and global garmenting growth. However, short-term headwinds (weak consumer demand & margin pressures) persist, making it a long-term investment play rather than a short-term bet.
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.
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।
:)
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
Thanks Shankar for the timely post! I did accumulate on the next Monday after the post. And seems Mukul Agarwal added 1.18% to his bucket as well! I will add more in the coming week. Also I think the government's initiative for the textile industry might also be another positive factor.
Most welcome. I think Raymond is a long term game, but it's at a decent support price. I'm keenly awaiting Q2 results, it's likely to be good with a lot of pent-up demand from Q1FY25 showing up.
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
Hi Sir, any reflections from Q3 FY25 results and commentary? My main question is if Raymond is struggling to grow under intense competition !!
Weak domestic consumption is a general concern, although a temporary one
New budget will hopefully give some boost to the overall consumption.
Thanks
Sorry. I have no views at the moment
https://images.moneycontrol.com/static-mcnews/2024/10/20241021152959_Raymond-Lifestyle_21102024_Motilal-Oswal.pdf
Thanks for sharing. I read that aswell, my read was -- one might have to be a bit patient with this company. Give it time but track it every quarter
This gives more assurance after your Shankar. You were first for sure 👍🏻 thanks for the insights and helping others when you can enjoy your FIRE life and vacations 😊
Thank you! 🙌
Highlights from Q3FY25.
Summary of Market Sentiments, Economic Conditions, and Future Growth Prospects from an Investment Perspective
#1. Market Sentiments & Economic Conditions
- Indian Economy Resilience: Despite global uncertainties, India's GDP is projected at 6.5%, slightly below expectations.
- Weak Consumer Spending: Discretionary spending remains low due to high inflation and lower capital expenditure.
- Inflationary Pressures: The Consumer Price Index (CPI) remains high, with sticky food inflation affecting disposable incomes.
- Global Headwinds: Challenges like fluctuating commodity prices, supply chain disruptions, and geopolitical crises (e.g., Red Sea crisis) have impacted growth.
#2. Company Performance & Financial Health (Raymond Lifestyle Limited - Q3 FY25)
- Revenue Growth: +2% YoY at ₹1,796 crores, despite weak demand.
- EBITDA Decline: EBITDA at ₹221 crores, with a margin drop to 12.3% (vs. higher last year) due to upfront investments and segment mix.
- Segment-wise Performance:
- Branded Textiles: Revenue down 6% YoY (₹856 crores) due to weak demand; EBITDA margin dropped to 18% from 21.6%.
- Branded Apparel: Revenue grew 5% YoY (₹458 crores) due to new product launches; however, EBITDA margin fell to 9.6% from 13.9% due to store expansion and advertising.
- Garmenting: Strong revenue growth (₹309 crores, +18%), but margin decline (7.8% vs. 11.3%) due to freight costs and expansion costs.
- High-Value Cotton Shirting: Revenue declined 6% YoY; EBITDA margin at 10.3%.
#3. Growth Prospects & Strategy
- Focus on Premiumization: Expansion in premium & casual segments, including Ethnix (ethnic wear) and SleepZ (sleepwear), plus a new innerwear line (Park Avenue Innerwear).
- Retail Expansion: Opened 61 new stores (incl. 14 Ethnix stores); total retail network now 1,653 stores in 600+ cities.
- Garmenting Expansion: Plans to become the third-largest suit manufacturer globally through capacity expansion.
- Positive Order Bookings: Early trends for FY26 bookings in textile and apparel segments indicate a potential recovery in demand.
#4. Investment Considerations
- EBITDA Recovery Target: Management expects a 15% EBITDA margin in FY26, as investments in retail expansion and advertising stabilize.
- Debt-Free Status: Strong net cash position (₹61 crores), with working capital improving to 89 days.
- Market Share & Competition: While branded textiles see slow growth, new adjacent categories (Ethnix, Sleepwear, Innerwear) offer multiplier growth opportunities.
- Stock Performance Outlook: If consumer spending picks up and economic headwinds ease, FY26 could be a strong recovery year.
#5. Key Risks
- Sustained Weak Consumer Demand: Urban discretionary spending remains weak, impacting premium segment sales.
- High Input Costs & Freight Expenses: Geopolitical issues like the Red Sea crisis could increase supply chain costs.
- Competition in New Categories: Innerwear & Sleepwear markets are competitive; success depends on brand penetration & execution.
Final Takeaway
From an investment standpoint, Raymond Lifestyle is positioned for medium-term recovery (FY26 onwards) with premiumization, retail expansion, and global garmenting growth. However, short-term headwinds (weak consumer demand & margin pressures) persist, making it a long-term investment play rather than a short-term bet.
Hey
Whats your views after Q3 results?
I have no views presently