Raymond Lifestyle to go public in first week of September. Analysts break down likely valuation, business, and more.

Raymond Lifestyle is likely to go public in the first week of September 2024, the brokerage firm said in a note released after the company’s analyst meeting. The company expects its EBITDA to double to ₹Analysts say Raymond Lifestyle is expected to touch Rs 2,000 crore in sales by FY 2028, with sales in the lifestyle segment expected to grow by 12-15%. Raymond Lifestyle recently held a factory tour and analyst gathering at its plant in Vapi, Gujarat.

The brokerage highlighted in the report that the company’s growth will be driven by expanding its EBO network, leveraging opportunities offered by China and Bangladesh +1, expanding into new categories such as nightwear and lingerie, and developing its bridal wear business.

As part of the company’s restructuring, Raymond is spinning off its lifestyle business into a separate company. Raymond shareholders will receive four shares of Raymond Lifestyle for every five shares of Raymond stock they hold. In addition, Raymond also announced the spin-off of its real estate business into another company called Raymond Realty. The Raymond Group will now consist of three public companies: Lifestyle, Real Estate and the existing entity (Engineering).

Let’s review the brokerage firm’s analysis of the company’s business, valuation, and investment rationale.

Motilal Oswal Financial Services

The brokerage firm report said Raymond was actively involved in the sale of the FMCG business, separation of the lifestyle business, restructuring of the real estate business and setting up of an engineering unit following the acquisition of Maini Precision (MPPL). These actions are expected to create shareholder value in each business through effective management, cash optimization, and cost and WC optimization.

“We expect revenue/EBITDA growth of 6% in FY24-2026E, driven primarily by branded apparel and ready-to-wear segments, with cash flows supported by branded textiles. Based on the company’s data, ROE/ROCE figures for FY24E are 10/32%. We estimate an EV/EBITDA of 15x (implied P/E of 28x) for FY26E, leading to a valuation of ₹159 billion (per share ₹2,610 shares),” the brokerage said.

According to the brokerage, Raymond Lifestyle is bullish on the huge potential in the wedding, textile, exports and styling segments in India. The company is targeting 12-15%/16-17% CAGR in EBITDA and sales during FY24-FY28. 18-20% CAGR in its apparel and accessories business (about 40% of revenues) and 7-8% CAGR in the high ROCE textiles unit (about 50% of revenues) are likely to drive top-line growth. With 400 stores, Raymond Lifestyle is expected to be 10 times the size of Ethnix, which had only 114 stores in FY24, bringing ₹1 billion.

“Given that ₹$2 billion of capex is being spent on the apparel business, which we think will rank among the top three globally with a capacity of 10 million pieces. The apparel business enjoys macro tailwinds, benefiting from diversification of global supply chains and potential free trade agreements. Raymond Lifestyle has seen steady margin growth and a growing branded apparel/garment business despite faster growth in relatively lower margin non-textile businesses. It is a net debt-free company and is expected to list by mid-September 24,” the brokerage said.

Antique Stock Brokers Ltd

The brokerage report mentioned that according to its assessment, important factors that need to be monitored include the expansion of branded apparel and ethnic wear lines, and the performance of new product categories such as underwear and sleepwear.

“We expect Raymond Lifestyle to grow revenue/EBITDA CAGR of 13%/15% in FY2024-27E. Using SoTP-based valuation, we estimate Raymond Lifestyle’s fair valuation to be ₹“As per FY27 estimates, the company’s market capitalisation is $180 billion. The stock is expected to be listed by September 2024,” the brokerage said.

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