“Raymond Lifestyle Plummets 35%: Is It Time to Buy, Hold, or Sell?”

Shares of Raymond Lifestyle Ltd, the separated unit of Raymond Ltd encompassing the retail and lifestyle sectors, have decreased nearly 35 percent from their recent peak. However, MOFSL is optimistic about a potential valuation re-rating in the medium term. They have retained their ‘Buy’ rating on the stock, setting a target price of Rs 3,000.

According to MOFSL, a recovery in growth within the branded apparel sector, the expansion of newer categories such as sleepwear and innerwear, and the successful implementation of Ethnix by Raymond are expected to be the primary growth catalysts, anticipating a 9-10 percent increase in sales, EBITDA, and profit from FY24 to FY27.

On Tuesday, the stock wrapped up at Rs 2,021.05 on NSE. The stock reached a peak of Rs 3,100 in September. MOFSL’s target indicates a potential upside of 48 percent ahead.

“While Raymond Lifestyle enjoys strong brand loyalty, its valuation has faced challenges due to slow execution in the past (fluctuations in PAT growth over FY10-20). Nonetheless, RLL’s renewed commitment to growth, coupled with stringent working capital management, may lead to a valuation re-rating in the medium term,” they stated.

MOFSL mentioned that the festive season along with the ongoing wedding period has enhanced the demand environment for retailers like Raymond Lifestyle, anticipating a double-digit growth (12-14 percent) in secondary sales, which should yield better collections in Q3FY25.

Nevertheless, primary sales might exhibit improved demand with a quarter’s delay due to higher inventory levels in the channel amidst reduced demand over the past 12-15 months.

“Due to an increased number of wedding days extending the season into 1HFY26, the demand momentum is likely to remain strong, which puts RLL in an advantageous position as its wedding portfolio constitutes approximately 35-40% of its total revenue,” MOFSL highlighted.

MOFSL indicated that Raymond Lifestyle is aiming for 12-14 percent revenue growth and 15-18 percent growth in EBITDA and PAT in the medium term. The branded apparel segment will be the main growth driver, supported by an expanded EBO presence, the ramp-up of Ethnix by Raymond, and the entry into sleepwear and innerwear markets.

The domestic brokerage noted that Raymond Lifestyle operates at 30 percent operational RoCE, and the management anticipates further RoCE improvement, driven by a revitalized demand environment, leading to better collections, alongside a moderation in capital expenditure compared to FY25 levels.

Raymond Lifestyle boasts a portfolio of well-established brands, including Park Avenue, Raymond RTW, Parx, and Colorplus. However, the presence of Raymond Lifestyle brands remains underrepresented with 463 EBOs (which include Ethnix EBOs). The company plans to raise its EBO count to 900 by FY27, as brands like Park Avenue, ColorPlus, and Ethnix are expected to expand their footprint to 300 stores each across Tier-1 to Tier-4 cities.

“Most of RLL’s EBO expansion will likely be conducted through the asset-light FOFO model. In addition, the company is aiming to grow its presence in large-format stores (LFS) and multi-brand outlets (MBOs),” MOFSL remarked.