Raymond Lifestyle up 3% as Motilal Oswal reiterates 'Buy'; 49% upside eyed

Raymond Lifestyle share price: Clothing brand Raymond Lifestyle share price saw action on Thursday, December 26, 2024, as the scrip rose up to 3.42 per cent to hit an intraday high of Rs 2,089 per share. 

 

However, at 12:00 noon, Raymond Lifestyle shares were off highs, and were trading 1.59 per cent higher at Rs 2,051.95 per share. By comparison, BSE Sensex was trading with slight gains, up 0.07 per cent at 78,530.44 levels.

 

The northward movement in Raymond Lifestyle's share price followed domestic brokerage firm Motilal Oswal reiterating a ‘Buy’ rating, maintaining a target price of Rs 3,000. The target price indicated a potential upside of 48.52 per cent from its December 24 closing price of Rs 2,019.90.

 

Motilal Oswal analysts acknowledged that while Raymond Lifestyle benefits from strong brand recognition, its valuation has been historically constrained by inconsistent execution, particularly the volatility in profit after tax (PAT) growth during FY10–20. However, the company’s renewed focus on growth and stringent working capital management could pave the way for a valuation re-rating over the medium-term.

 

Key growth drivers, analysts believe, include a recovery in the branded apparel segment, the scaling up of new categories such as sleepwear and innerwear, and the successful execution of the Ethnix by Raymond initiative.

 

“We build in a compound annual growth rate (CAGR) of 9-11 per cent in revenue/earnings before interest, tax, depreciation and amortisation (Ebitda)/PAT over FY24-27. We value Raymond Lifestyle at a price-to-earnings (PE) multiple of 30x on December 2026E, resulting in a target price (TP) of Rs 3,000 per share. Reiterate our ‘Buy’ rating on Raymond Lifestyle,” said Motilal Oswal, in a note.

 

On the bourses, Raymond Lifestyle share has risen a little over 3 per cent in the last five trading sessions, while it has fallen 0.3 per cent in the past month.

 

Give this, here are the top factors for reiterating ‘Buy’ on Raymond Lifestyle:

 

Expansion of branded apparels distribution network

 

Motilal Oswal analysts highlight that Raymond Lifestyle benefits from a legacy of established brands such as Park Avenue, Raymond RTW, Parx, and Colorplus. Despite this, the presence of Raymond Lifestyle brands remains under-penetrated, with 463 Exclusive Brand Outlets (EBOs), including Ethnix EBOs. 

 

The company aims to comprehensively expand its retail network in the branded apparels segment while sustaining mid-single-digit like for like (LFL) growth. By FY27, Raymond Lifestyle targets to double its EBO count to about ~900, reflecting a ~30 per cent CAGR over FY24-27. Brands like Park Avenue, ColorPlus, and Ethnix are expected to reach 300 stores each across Tier-1 to Tier-4 cities.

 

The company’s expansion strategy is predominantly focused on the asset-light FOFO model, complemented by an increased presence in large-format stores (LFS) and MBOs. Recently, Raymond Lifestyle launched the ‘Sleepz by Raymond’ brand, introducing sleepwear in the price range of Rs 500-999. It is also venturing into the innerwear segment through Park Avenue Innerwear. Together, these categories are projected to generate incremental revenue of ~Rs 300 crore by FY27.

 

Increasing focus on ethnic and wedding wear via Ethnix

 

Raymond’s strong customer recall in wedding wear positions it as a key player in the Indian ethnic wear segment, analysts at Motilal Oswal highlighted. Approximately 35-40 per cent of Raymond Lifestyle’s total revenue comes from its wedding wear portfolio. With ‘Ethnix by Raymond,’ the company aims to establish a robust presence in the largely unorganised ethnic wear market, estimated at ~Rs 14,000-15,000 crore.

 

Ethnix currently operates 136 EBOs, generating ~Rs 100 crore in revenue in FY24. The company plans to expand its Ethnix footprint to over 300 stores in the next 2-3 years, targeting annual revenue of ~Rs 350 crore. 

 

With a focus on the ~Rs 15,000-30,000 price segment, Raymond Lifestyle aims to capture market share from unorganised players. Additionally, Ethnix stresses upon in-house operations rather than designer-led collaborations, leveraging its strong brand equity and higher gross margins in the ethnics category.

 

Challenges in garment-exporting countries benefit Raymond Lifestyle

 

The domestic brokerage pointed out that the evolving dynamics in global garment-exporting countries provide a favourable outlook for Raymond Lifestyle. 

 

Challenges in Bangladesh (~$50 billion market), the global China+1 strategy, and free trade agreements (FTAs) with regions like the UK, EU, and Australia are expected to create major opportunities for Raymond Lifestyle’s garmenting business.

 

Bangladesh’s competitive edge from low power costs is diminishing, and its anticipated loss of least developed countries (LDC) benefits in CY29 will further improve the position of Indian textile companies. Raymond Lifestyle has already onboarded premium clients like Calvin Klein and Tommy Hilfiger through free trade agreements (FTAs) with Australia and is in discussions with large global brands such as Marks & Spencer and H&M, supported by forthcoming FTAs with the UK and EU.

 

Moreover, to capitalise on these trends, Raymond Lifestyle is investing Rs 200 crore over FY24-25 to boost its capacity. The investment aligns with the China+1 and Bangladesh+1 shifts, enabling the company to achieve ~11 per cent revenue CAGR in its garmenting business over FY24-27. Furthermore, Ebitda margins are projected to improve to ~12 per cent by FY27, driving a ~17 per cent Ebitda CAGR during the same period.