Raymond: Other income fillip - Views on News from Equitymaster

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

  • MyStocks


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

Raymond: Other income fillip

Aug 21, 2003

The post 2005 scenario for the textile sector has raised lot of hopes among investors in general. While it is not as rosy as it seems, some companies are in a position to capitalise on the growth opportunity arising out of removal of WTO restrictions. Raymond is one among them. We consider the 1QFY04 performance of the company in general and future growth prospects.Raymond, the leading producers of suiting fabrics, posted a huge 398% increase in net profit growth in the June quarter. Though topline grew at a faster rate of 13%, operating profits grew very marginally. But net profit almost quadrupled due to higher other income.

(Rs m)1QFY031QFY04Change
Other Income21150614.3%
Operating Profit (EBDIT)1982001.0%
Operating Profit Margin (%)13.6%12.2% 
Interest -income/(expense)-2362-
Profit before Tax61264332.8%
Profit after Tax/(Loss)42209397.6%
Net profit margin (%)2.9%12.7% 
No. of Shares (m)61.461.4 
Earnings per share (Rs)*2.713.6397.6%
(* annualised)   

Textile Division continues to be the major contributor to the company's total sales and profitability. Though the revenue from this segment has increased by 6% YoY, the contribution to topline has comedown to 62% in 1QFY04 from 65% in 1QFY03. Textile business being seasonal in nature, the bulk of the despatches of high value fabric takes place during the later part of the year. Hence, performance of the first quarter is not representative of the full year's performance.

Revenues from files and tools division shrunk by around 6% YoY. The demand for these products have been more or less stagnant, both domestic and internationally. Moreover, the company is facing stiff competition in this segment from cheap supplies from China. Margins were lower mainly due to increase in steel prices.

The company has increased its denim production capacity from 10m meters in FY02 to 16m meters in 1QFY04. As a result, sales have grown substantially by 53% YoY. It has plans to increase the denim production capacity to 20m meters by the end of FY04. However, margins in this segment were hit due to increase in the cotton prices. Given this backdrop of higher input costs, operating margins in 1QFY04 suffered.

Profits arising from sale of the assets of a divested business and interest income earned on the investments contributed to higher other income in 1QFY04. If one were to exclude the rise, net profit in 1QFY04 has actually declined substantially.

Let’s have a look at the segmental break-up of revenue.

(Rs m)1QFY031QFY04Change
Segmental revenue
Files & Tools302282-6.4%
Segmental results
PBIT margin9.2%10.1% 
Files & Tools4129-28.4%
PBIT margin13.5%10.3% 
PBIT margin19.5%14.1% 
PBIT margin-- 

At the current price of Rs 130, the stock trades at the P/E multiple of 9.5x annualised 1QFY04 earnings. But as we have said earlier, textile being seasonal in nature, the first quarter performance does not reflect the true picture. It has also got to be remembered that the key growth driver of the company is garments (i.e. ‘Parx’ and ‘ColorPlus’). Since both these brands are a part of the company’s subsidiaries, the consolidated picture will reflect the true valuation. Accordingly, the stock trades at 6x FY04E earnings.

Equitymaster requests your view! Post a comment on "Raymond: Other income fillip". Click here!


More Views on News

RAYMOND 2019-20 Annual Report Analysis (Annual Result Update)

Dec 10, 2020 | Updated on Dec 10, 2020

Here's an analysis of the annual report of RAYMOND for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of RAYMOND. Also includes updates on the valuation of RAYMOND.

Top Performing Penny Stocks of 2021 (Views On News)

Aug 28, 2021

Several penny stocks have delivered multi-fold returns in a short span of time. Here are a few of them.

Grasim Results Review: Net Profit Beats Estimates as Revenues Rise 182% (Views On News)

Aug 16, 2021

Higher VSF exports help Grasim amid weak domestic demand.

Rupa & Company Stock in Focus on Strong Quarterly Results (Views On News)

Jun 1, 2021

Here's a rundown on the latest quarterly results of Rupa and Company.

Lux Industries Stellar Results Puts Stock in Focus (Views On News)

May 26, 2021

The stock hits new high after posting strong results.

More Views on News

Most Popular

Sansera Engineering IPO: Key Points to Consider (Views On News)

Sep 8, 2021

This IPO is a pure OFS and the company is looking to raise Rs 12.8 bn at the upper price band of Rs 744.

5 Stocks that Turned Rs 1 Lakh into Rs 1 Crore (Views On News)

Sep 7, 2021

Patience is one of the biggest virtues you need to have if you want to become a crorepati in the stock market.

The Top Stocks to Sell in this Bull Market (Profit Hunter)

Sep 8, 2021

When I saw the list of so-called 'value stocks' published by a leading brokerage, my worst fears came true.

5 Indian Companies that are Leading the AI Race (Views On News)

Sep 9, 2021

During the pandemic, India reported the highest increase in the use of AI at 45% compared to other major economies. AI has potential to add US$90 bn to the Indian economy by 2025.

How to Create a Second Income from Trading (Profit Hunter)

Sep 10, 2021

My trading system that works in all kinds of markets.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Sep 17, 2021 (Close)


  • 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