Raymond Lifestyle shares rally 3% as Motilal Oswal predicts 29% upside
The brokerage’s confidence stems from RLL’s renewed focus on growth and disciplined working capital management, which could drive a significant valuation re-rating in the medium term.
“While RLL benefits from strong brand affinity, its valuation has been impeded by sluggish execution in the past (volatility in PAT growth over FY10-20). However, RLL’s renewed focus on growth, along with working capital discipline, could lead to a valuation re-rating over the medium term,” said Motilal Oswal in its report.
The domestic brokerage firm believes that a growth recovery in the branded apparel segment, the scale-up of newer categories like sleepwear and innerwear, and the successful execution in Ethnix by Raymond are the key growth drivers.
RLL is capitalizing on its strong wedding wear brand recall, which contributes 35-40% of its revenue, to expand in the Rs 14,000-15,000 crore unorganized ethnic wear market through “Ethnix by Raymond.” With 136 stores generating Rs 100 crore in FY24, RLL plans to scale Ethnix to over 300 stores in the next 2-3 years, targeting Rs 350 crore in revenue, focusing on the Rs 15,000-30,000 price range while avoiding designer-led tie-ups to capture high-margin opportunities and increase market share.
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Further, the domestic brokerage firm highlighted that the headwinds in leading garment-exporting countries bode well for RLL.
The ongoing turmoil in Bangladesh’s USD 50 billion garment market, combined with the global shift to the China+1 strategy and free trade agreements (FTAs) with the UK, EU, and Australia, presents a significant growth opportunity for RLL’s garmenting business.
With Bangladesh losing its low-cost advantage and potentially its LDC benefits by CY29, RLL is well-positioned to gain competitiveness.
The festive and ongoing wedding season has also improved the demand environment for retailers such as RLL, with expectations of double-digit growth (12-14%) in secondary sales, which should result in improved collections in 3QFY25.
However, primary sales may reflect demand improvement with a quarter’s lag owing to higher inventory in the channel amid demand weakness in the past 12-15 months.
Given a higher number of wedding days extending the season to 1HFY26, the demand momentum is expected to remain robust, which places RLL in a sweet spot as its wedding portfolio accounts for 35-40% of its total revenue.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
