X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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: Stiff task ahead - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 28, 2001

    Raymond: Stiff task ahead

    Among the turnaround stories in India Inc., Raymond stands out in one way. It managed to sell two of its non-core businesses viz. cement and steel to multinationals at a fairly descent price and now it is focusing purely on fabrics and garments for growth in the coming years. But is the turnaround for real?

    (Rs m) 1HFY01 1HFY02 Change
    Sales 6,661 3,976 -40.3%
    Other Income 78 90 15.3%
    Expenditure 5,802 3,190 -45.0%
    Operating Profit (EBDIT) 859 786 -8.5%
    Operating Profit Margin (%) 12.9% 19.8%  
    Interest 556 90 -83.8%
    Depreciation 483 258 -46.5%
    Profit before Tax (102) 528  
    Extraordinary item (1,760) (15) -99.1%
    Tax - 148  
    Profit after Tax/(Loss) (1,862) 365  
    Net profit margin (%) -28.0% 9.2%  
    No. of Shares (m) 75.1 61.4  
    Diluted Earnings per share* - 11.9  
    P/E Ratio   8.0  
    (*annualised)      

    The performance of the company in the first half of the current fiscal is purely a reflection of the change in sales mix. While turnover fell by 40% to Rs 3,976 m, much of it is on account of the sale of cement and steel, which contributed to 33.9% of the company's turnover in FY01. On the other hand, operating margins went up sharply from 12.9% in 1HFY01 to 19.8% in 1HFY02 due to a sharp fall in raw material and manufacturing expenses. The company was expected to save Rs 1.5 bn from the sale of non-core activities, which hitherto were pressurising profits of the company. The results were in line with our expectations and going forward, the company is expected to improve its operating margins even further.

    Benefiting divestments…
    (Rs m) FY99 FY00 FY01
    Cumulative savings in cost 2,373 3,126 1,533
    % of raw material cost 56.2% 66.9% 42.9%
    % of total cost 19.6% 25.4% 11.7%

    Coming to the growth prospects of Raymond, there is not much to cheer about at the current juncture. For one, given the mature nature of the fabrics segment (69% of FY02E turnover) and a unlikely price increases, growth prospects are restricted. Apart from fabrics, Raymond is the worldwide market leader in the steel files segment (8.7% of FY01 sales). Weakening industrial production, globally as well as in domestic markets, does not augur well for the industry in the current year. While Raymond was expecting a 10% growth in sales in the current fiscal, the September attacks on the US coupled with slowdown in other key economies are likely to subdue growth prospects.

    The likely impetus to the topline for Raymond is the garments segment, which has been growing at a CAGR of 25%. Raymond has one of the best brands in the industry i.e. 'Parx'. The upmarket nature of the product also benefits the company in terms of premium pricing. But rather unfortunately, this business contributes to just 1.2% of sales and even after doubling growth, it does not add to the topline significantly. So the company has been scouting for acquisitions, both in domestic as well as international markets, to give fillip to sales. Raymond's acquisition of Regency Textiles Portugesa Limitada, a company incorporated in Portugal, engaged in manufacturing and marketing of readymade garments in 2QFY02 is in line with its inorganic growth strategy. The consideration for the proposed acquisition is US$ 3 million (Rs 144 m). But one has to look at the product profile to guage long-term growth prospects.

    The company merged Calitri Denim, one of its loss making subsidiary in FY01, with itself and consequently denim business was added to the portfolio (5.7% of FY01 sales). Though denim prices have started to move up after prolonged slump, Raymond's capacity expansion plans on the denim front is worrying.

    Given this backdrop, the challenge for the company is to increase the size of the garments business and to consolidate its presence in steel files and fabrics segment, which has been growing at a slower rate. Though it has been successful on the later, much has to be done on the garments front to boost growth. Not surprisingly, even after the buy-back, the scrip has been languishing at Rs 95 levels. It is trading at a P/E multiple of 8.0x annualised 1HFY02 earnings.

     

     

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

      
     

    More Views on News

    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

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    RAYMOND SHARE PRICE


    Aug 21, 2017 12:38 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

    RAYMOND - SANGAM INDIA COMPARISON

    Compare Company With Charts

    COMPARE RAYMOND WITH

    MARKET STATS