Raymond - Under Review - Motilal Oswal

RAYMOND 3QFY11: Results above est; Extra-ordinary item of Rs2.3b for VRS impacts Reported PAT; Under Review

Raymond reported 3QFY11 results above estimate. Standalone revenues increased 21% YoY to Rs4.5b, while adj standalone PAT stood at

Consolidated revenues stood at Rs8.2b, while consolidated EBITDA stood at Rs1.7b (EBITDA margin of 20.9%).

Management guided for continued strong margins (3QFY11 standalone EBITDA margin stood at 22%) and negated concerns of any possible margin squeeze.

While labor issues have been successfully resolved, management is yet to finalize development plans for monetizing ~110 acres of real estate at Thane plant.

The company plans to utilize proceeds from real estate monetization to lower its debt. Gross consol debt stands at ~Rs16.5b, while net debt is ~Rs11.5b.

We are in the process of revising our estimates given key developments such as VRS implementation at Thane plant, possible turnaround in the denim business, and unlocking of real estate value. The stock trades at PER of 16.9x FY12 EPS of Rs14.4 and 13.8x FY13 EPS of Rs22.8. We await further details on land monetization process and in the interim place our rating Under Review.

Source : Equity Bulls

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