InstitutionalEquities

IndiaResearch

Textile&Apparel

January24,2014

Raymond
Bloomberg:RWIN
Reuters:RYMD.BO

RESULTREVIEW

HOLD

Margin Expansion Surprised across Business;

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.

EBITDA margin stood at 12.1% (higher than our expectation of 11.0%) in

Q3FY14 vs.9.6%in Q3FY13.RawMaterial/Sales were reportedat 38.5%(our
expectation38%)from37.8%inQ3FY13,StaffcostwasloweratRs.1.51bnvs.
ourexpectationofRs.1.53bn.Otherexpenseswerereportedlowerat36.9%of
salesasagainstourestimateof37.8%ofsales.

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)

Q3FY13 Q2FY14 Q3FY14 QoQ(%) YoY(%)

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

INSTITUTIONALRESEARCH

Analysts

Industry/Sector

DeskPhone

EmailID

AmeyChalke

PharmaceuticalsAssociate

+912261844325

amey.chalke@karvy.com

AnkurLakhotia

DerivativesandQuantAssociate

+912261844327

ankur.lakhotia@karvy.com

HatimBroachwala,CFA

Banking

+912261844329

hatim.broachwala@karvy.com

KrutiShah,CFA

Economist

+912261844320

kruti.shah@karvy.com

ManojKumarManish

DerivativesandQuantAnalyst

+912261844343

manojkumar.m@karvy.com

MarutiKadam

ResearchAssociate

+912261844326

maruti.kadam@karvy.com

MitulShah

Automobiles

+912261844312

mitul.shah@karvy.com

ParikshitKandpal

Infra/RealEstate/Consumer/Strategy

+912261844311

parikshit.kandpal@karvy.com

RahulSharma

Pharmaceuticals

+912261844310

rahul.sharma@karvy.com

RahulSingh

Textiles

+914044857911

rahulsingh@karvy.com

RajeshKumarRavi

Cement,Logistics&Paints

+912261844313

rajesh.ravi@karvy.com

RupeshSankhe

Power/CapitalGoods

+912261844315

rupesh.sankhe@karvy.com

VarunChakri

ResearchAssociate

+912261844326

varun.chakri@karvy.com

INSTITUTIONALSALES

CelineDsouza

Sales

+912261844341

celine.dsouza@karvy.com

EdelbertDcosta

Sales

+912261844344

edelbert.dcosta@karvy.com

bhavesh.gandhi@karvy.com

INSTITUTIONALSALESTRADING&DEALING
BhaveshGandhi

SalesTrader

+912261844368/69

PrashantOza

SalesTrader

+912261844370/71

prashant.oza@karvy.com

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SalesTrader

+912261844368/69

gurdarshansingh.k@karvy.com

PRODUCTION

AsimKumarMohapatra

Editor

+912261844318

asim.mohapatra@karvy.com

VijayalaxmiL.Moolya

Production

+912261844328

vijayalaxmi.m@karvy.com

StockRatings
Buy
Hold
Sell

:
:
:

AbsoluteReturns
>15%
515%
<5%

Forfurtherenquiriespleasecontact:

research@karvy.com
Tel:+912261844300

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.
Disclaimer
The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information
containedhereinisbasedonouranalysisanduponsourcesthatweconsiderreliable.We,however,donotvouchforthe
accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss
incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors.
Investorsmustmaketheirowninvestmentdecisionsbasedontheirspecificinvestmentobjectivesandfinancialpositionand
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The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above
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