X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Raymond: The path ahead - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Raymond: The path ahead

Aug 12, 2002

The path to turnaround has been a steady one for Raymond Limited, the textiles and denim major. After having divested some of its non-core businesses, there has been a marked improvement in profitability of the company. The first quarter performance also suggests that Raymond has benefited from consolidating its presence in the textile business.

(Rs m) 1QFY02 1QFY03 Change
Sales 1,321 1,452 9.9%
Other Income 24.9 21.1 -15.3%
Expenditure 1,201 1,253 4.4%
Operating Profit (EBDIT) 121 199 65.0%
Operating Profit Margin (%) 9.1% 13.7%  
Interest 49 23 -52.4%
Depreciation 129 135 5.0%
Profit before Tax -31 62 -
Extraordinary item (15) - -
Tax - 19 -
Profit after Tax/(Loss) (46) 43 -
Net profit margin (%) -2.4% 3.0%  
Diluted number of shares 61.4 61.4  
Diluted Earnings per share* -3.0 2.8  
P/E (x)   38.5  
*(annualised)      

Raymond reported a 10% rise in topline for 1QFY03, which was primarily led by a 46% rise in textile sales. This impressive performance could be on account of its fabrics division that contributed to around 69% of sales in FY02. The company has been increasingly focusing on export market as demand has been lacklustre back home. Textile sales of Rs 1,090 m in 1QFY03 also include Raymond's garment business that has been growing at a impressive rate over the last three years (11% CAGR). However, garment sales still contribute an insignificant portion to revenues (estimated at around 1.5% in 1QFY03) even after considering the acquisition of a Portugal company last year.

The sales mix...
(Rs m) 1QFY02 1QFY03 Change
Textiles 745 1,090 46.3%
% of sales 56.4% 75.0%  
Files and tools 323 302 -6.5%
% of sales 24.4% 20.8%  
Denim 245 275 12.3%
% of sales 18.6% 19.0%  
Total of the above 1,313 1,667 26.9%

Denim manufacturers, both in the international and domestic markets, have benefited in a large way over the last year and a half from the strengthening of denim prices. Denim is back in the limelight with the international fashion houses and Raymond (being one of the key suppliers to many fashion houses) has taken advantage of the situation. Denim sales have risen 12% during the quarter. We expect the denim division to post around 10% growth for FY03. The global slowdown in the industrial sector has however, affected the performance of the files division where Raymond is one of the largest players in the world.

Raymond continues to benefit from the sell-off of its cement and steel division. Operating margins have increased notably to 14% in 1QFY03 on account of lower material and manufacturing expenses. Interest costs have more than halved in 1QFY03 as the company is estimated to have repaid debts close to Rs 700 m in the same period. Going forward, interest cost would continue to fall (but at a slower rate) as the government has recently relaxed repayment of ECBs, to a certain extent. The company was not able to repay foreign currency loans in the past due to stiff guidelines (the quantum of foreign currency loans in FY02 was Rs 1,355 m or 25% of total debt of the company). Raymond could have taken advantage of this as well in 1QFY03. Other income has declined despite cash balance of Rs 344 m in FY02 due to accelerated debt repayment.

The stock currently trades at Rs 108 implying a P/E multiple of 38.5x 1QFY03 annualised earnings. On the consolidated FY02 EPS of Rs 12, P/E multiple works out to 8.7 times. In FY03, sluggish domestic and international markets could subdue growth prospects of its garments and textile divisions. However, margin improvement would continue to remain impressive. This combined with lower interest expenses will propel profit growth at a net level in FY03. However, the key cause of concern is how the company utilises its surplus cash. Raymond has already initiated denim capacity expansion, which has raised apprehensions amongst investors, considering the fact that there is excess capacity in the global markets. Infact there are possibilities that the rise in denim prices could be shortlived. Therefore, the key lies in how the company increases the contribution from the garments division in the future without any further diversifications.


Equitymaster requests your view! Post a comment on "Raymond: The path ahead". Click here!

  

More Views on News

RAYMOND Announces Quarterly Results (3QFY19); Net Profit Up 53.1% (Quarterly Result Update)

Jan 24, 2019 | Updated on Jan 24, 2019

For the quarter ended December 2018, RAYMOND has posted a net profit of Rs 451 m (up 53.1% YoY). Sales on the other hand came in at Rs 17 bn (up 12.9% YoY). Read on for a complete analysis of RAYMOND's quarterly results.

RAYMOND Announces Quarterly Results (2QFY19); Net Profit Up 1.3% (Quarterly Result Update)

Nov 9, 2018 | Updated on Nov 9, 2018

For the quarter ended September 2018, RAYMOND has posted a net profit of Rs 666 m (up 1.3% YoY). Sales on the other hand came in at Rs 18 bn (up 15.8% YoY). Read on for a complete analysis of RAYMOND's quarterly results.

Discover the Secrets of Hidden Smallcaps From These AGMs (The 5 Minute Wrapup)

May 26, 2017

Don't be surprised to come across some Super Investors there!

More Views on News

Most Popular

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

My Master Series on How to Trade Election 2019(Profit Hunter)

Apr 16, 2019

For 30 years he has watched how elections impact the markets, and practiced how to profit from it. Now he is here...telling you everything. Read on...

Election Series: Follow the World's Biggest Traders To See Where the Money Flows(The 5 Minute Wrapup)

Apr 17, 2019

20% of all the traders bring in 80% of the money. Watch these 20% and you get a working idea of which way the wind is blowing.

A Letter to You from India's No. 1 Trader(The 5 Minute Wrapup)

Apr 15, 2019

It's our great pleasure to introduce Vijay Bhambwani to our readers - we consider Vijay to be India's best trader. Read on to find out why...

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

RAYMOND SHARE PRICE


Apr 25, 2019 (Close)

TRACK RAYMOND

  • Track your investment in RAYMOND with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE RAYMOND WITH

MARKET STATS