Focus on Branded Business to Help Raymond Scale Up
Asset-light model; branded textile/fabric business to also benefit from the new strategy, and realty business could act as an earnings trigger
Raymond reported a sharp jump in profits, which hit a speed breaker due to demonetisation. But things are getting better now. It has guided for sequential 4% sales growth and 250 bps EBIDTA margin jump to 9%.
The stock has corrected 15% after the note ban last November, making it a good buy. The stock is trading at 13 times estimated FY19 earnings and 0.6 times sales. The promoters have been consistently increasing their holding in the company for the past several quarters, giving further confidence. The real estate business which could act as an earnings trigger — the Street has not factored this — is expected to generate revenues sooner than anticipated.