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: Rupee benefits - 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: Rupee benefits

Oct 23, 2003

Raymond, the leading producer of suiting fabrics, has reported subdued performance for the September quarter. Topline has increased by just over 9% mainly due to the increase in denim production capacity. But the bottomline has grown by around 15% mainly due to higher non-core income. Operating profits of the company have gone down by around 13% YoY.

(Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
Sales 2,956 3,229 9.2% 4,623 5,084 10.0%
Other Income 90 133 47.1% 111 283 154.0%
Expenditure 2,379 2,726 14.6% 3,847 4,380 13.9%
Operating Profit (EBDIT) 577 503 -12.7% 776 704 -9.3%
Operating Profit Margin (%) 19.5% 15.6%   16.8% 13.8%  
Interest -expense/(income) (12) (98) 737.6% (11) (160) 1355%
Depreciation 144 154 7.1% 279 302 8.3%
Profit before Tax 534 580 8.5% 619 844 36.4%
Tax 190 185 -2.8% 210 240 14.5%
Profit after Tax/(Loss) 344 395 14.7% 410 605 47.6%
Net profit margin (%) 11.6% 12.2%   8.9% 11.9%  
No. of Shares (m) 61.4 61.4   61.4 61.4  
Earnings per share (Rs)* 22.4 25.7   13.3 19.7  
P/E (x)   5.7     7.4  
(*annualised)            

Raw material cost as percentage of sales has gone up from 40% in 2QFY03 to 45% in 2QFY04. As a result, the operating margins of the company declined by around 390 basis points to below 16%. However, net profit margins improved marginally because of higher interest earnings, as Raymond, taking advantage of rupee appreciation, repaid long term borrowings due in US dollar terms.

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

Segmental break-up
(Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
Textile            
Revenues 2322 2468 6.3% 3412 3627 6.3%
PBIT 496 481 -2.9% 596 599 0.5%
PBIT margin 21.3% 19.5%   17.5% 16.5%  
Files & Tools            
Revenues 315 314 -0.4% 617 596 -3.3%
PBIT 40 14 -63.8% 80 44 -45.8%
PBIT margin 12.5% 4.6%   13% 7%  
Denim            
Revenues 327 456 39.4% 603 879 45.8%
PBIT 63 29 -54.7% 117 88 -24.4%
PBIT margin 19% 6%   19% 10%  
Others            
Revenues 75 5 -93.5% 90 12 -86.7%
PBIT 53 (36)   48 (64)  

As evident from the table above, textile division revenues for the quarter went up by 6% YoY, as compared to a lower growth in 1QFY04. Textiles being a seasonal business, the bulk of the despatches of high value fabric take place during the festival season and year-end. In this light, the third quarter (3QFY04) is likely to be better for the company going forward. Contribution of textiles to total revenues stood at around 76% for 2QFY04 as compared to 79% for 2QFY03. Margins during the quarter for this segment came down by 180 basis points, but we expect margins to improve in the second half.

Looking at the opportunities available post 2005, the company has doubled its denim production capacity from 10 m mtrs to 20 m mtrs. The revenues from denim business for 2QFY04 are up 39% YoY. Margins have reduced mainly due to increase in the cotton prices and lower realisations due to rupee appreciation in last few months.

Revenues from files and tools division somewhat recovered the setback of first quarter (down 6.4%) and were down marginally for 2QFY04 (0.4%). Margins got a hit mainly due to increased steel prices. The demand for its metal business has been more or less stagnant, both domestic and internationally. Moreover, the company is facing stiff competition in this segment from cheap China supplies.

We must remember that the key growth driver of the company is garments (i.e. ‘Parx’, ‘Park Avenue’ and ‘ColorPlus’). Since all these brands are a part of the company’s subsidiaries, the consolidated picture will reflect the true valuation. The recent acquisition of ColorPlus will strengthen its product portfolio, as ColorPlus is premium brand in casual segment and will also provide synergy of distribution network to Raymond.

At the current price of Rs 145, the stock trades at the P/E multiple of 7.4x annualised 1HFY04 earnings. However, if we exclude the non-core business income, the stock trades at P/E multiple of 15.7x. Though topline has grown, the decreasing profitability of denim, and file and tool business remains a cause of concern.


Equitymaster requests your view! Post a comment on "Raymond: Rupee benefits". Click here!

  

More Views on News

RAYMOND Announces Quarterly Results (4QFY19); Net Profit Up 32.8% (Quarterly Result Update)

May 2, 2019 | Updated on May 2, 2019

For the quarter ended March 2019, RAYMOND has posted a net profit of Rs 691 m (up 32.8% YoY). Sales on the other hand came in at Rs 18 bn (up 11.0% YoY). Read on for a complete analysis of RAYMOND's quarterly results.

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.

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

These Dividend Stocks Could Boost Your Returns Better Than You Can Imagine(Profit Hunter)

May 7, 2019

The art of dividend investing is a lot more than investing in companies with high dividend payouts or stocks with high dividend yields...

3 Indian Stocks Replicating Amazon's Successful Strategy(The 5 Minute Wrapup)

May 10, 2019

The one critical element that has made Amazon a force to reckon with...

My Top 7 Stocks to Profit from Sensex 100,000(The 5 Minute Wrapup)

May 16, 2019

Tanushree Banerjee explains everything you need to know about the Rebirth of India and Sensex 100,000.

A Simple Checklist for Picking Great Dividend Stocks(Profit Hunter)

May 9, 2019

A filtered, neat list of high-dividend stocks with all this dirty work already done for you.

A 10-Bagger in Just 6 Years! The Rebirth of India Will Create More Big Winners Like This(The 5 Minute Wrapup)

May 7, 2019

How a niche tech startup battled all odds to eventually become a 10 bagger.

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


May 20, 2019 03:37 PM

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