Multi Bagger Buy Raymond Recommended Price: Rs 259.75 Current Market Price: Rs 375.1 (24th Sept), up 44%. Raymond Ltd. is vertically and horizontally integrated to provide total textile solutions to customers with diverse product range of nearly 20,000 varieties of worsted suitings to customers across age, groups, occasions and styles, with over 60% market share.
The company is into fabrics and garment with strong brands like Raymond, Park Avenue, Parx, Colorplus, Manzoni, Zapp, Park Avenue women.The company has 13 lakh square feet of exclusive retail space, with 56 stores having added in the first half of FY10.
The company has 38 million meters per annum (mmpa) of worsted fabrics with plant located at Thane (7 mmpa) Chindwara, (14 mmpa) Vapi (14 mmpa) and Jalgaon (3 mmpa) with 11.5 mmpa of High Value Cotton Shirting fabrics at Kolhapur, 1.7 mmpa of Wollen Fabrics at Jalagaon
and 47 mmpa of Denim Fabrics at Yavatmal (40 mmpa) and Romania (7 mmpa). The company has its Garmenting unit at Banglore with capacity of 1.5 million shirts per annum, 1 million jackets, 2 million trousers and 1.50 million Denim Garmenting per annum and 200 suits per day.
For FY09, the company had a total income of Rs 1,440 crores with net loss of Rs 272 crores, which has arisen due to provision for diminution in value of investments having made, of Rs 239 crores in overseas subsidiaries.
However, performance has shown improvement for 9 months ending 31st December 09, with total income being placed at Rs 1,056 crores and PAT at Rs 18 crores. Infact, quarter ending December 09 has shown smart turnaround, with total income being placed at Rs 388 crores and PAT at Rs 42.57 crores yielding an EPS of Rs 7 for the quarter.
The present equity of the company is placed at Rs 61.38 crores, with face value of Rs 10 each, resulting in a market capitalization of less than Rs 1,500 crores. Promoters stake is at 39% while Institutional investors are holding 30%, with 31% stake being held by the public.
The company has recently closed its manufacturing operations at Thane, which was located on 160 acres of land. The company has recently planned to develop about 20 acres of land, to unlock the part value of land. It is said that present value of the land is about Rs.20 crores, per acre and the company now is thinking of selling land on an outright basis. Even if we exclude school, hospital and temple, from this land, the company has about 120 acres of land available for development, present value of which is estimated at about Rs 2,000 crores.
The net debt of the company is close to Rs 800 crores and the expected proceed from land sale, will be used by the company for expanding in Tier 2/3/4 cities by opening more retail stores, to capitalize on the booming rural demand.
It is expected that the company in near future is likely to go ahead with sale of part of this land. This will vastly re-rate the stock. When news of land development was announced by the company, share has moved to Rs 272 in January 10. Presently it is ruling at Rs 259.75. This time, it has potential to move past Rs 300 levels in the near future.
For FY11, the company is likely to post an EPS of close to Rs.15, with infusion of the funds coming in from land sell.
Share at Rs 259.75 looks a safe bet, as it can move to Rs 360 in next 6 months and above Rs 400 in next 12 months.