Raymond Stock Check: Down 13% in November, should you buy now?
Raymond has been very volatile this year, giving positive returns in 5 of the 11 months so far this year and negative in the remaining 6 months. It fell over 13 percent in November, extending losses for the third straight month since September.
Textile major Raymond has been in focus this month amid reports that Chairman Gautam Hari Singhania's estranged wife Nawaz Modi has demanded 75 percent of his fortunes. The couple announced separation earlier this month.
Nawaz Modi, the estranged wife of billionaire industrialist Gautam Singhania, has come out with allegations of physical abuse against her husband. In an exclusive interview with India Today, Modi claimed that she and her minor daughter, Niharika, were physically assaulted by Singhania.
When approached for comment regarding these allegations, Singhania refused to comment, as per the report. "In the interest of my two beautiful daughters, I would like to maintain my family's dignity and I will refrain from offering any comment. Please respect my privacy," he wrote in an email response, media reports said.
As part of a family settlement after the couple's divorce, 53-year-old Modi has reportedly demanded 75 percent of Singhania's alleged $1.4 billion net worth for herself and her two daughters — Niharika and Nisa.
Read here: Probe assault charges, proxy advisory firm urges Raymond's independent directors
Singhania has recommended creating a family trust and transferring the family's assets to it, with him serving as the only managing trustee, even though it is thought that he has generally consented to the demand. The terms are reportedly unacceptable to Nawaz Modi.
Promoters owned a 49.11 percent stake in Raymond as on September 30. At present, Nawaz is a Non-Executive Director at Raymond. Gautam, on the other hand, is Chairman & MD.
Stock Price Trend
The stock has outperformed benchmark indices in the last one year. It has gained 16 percent in the last 1 year as against a 7 percent gain in Nifty. Meanwhile, in 2023 YTD, the stock has underperformed the benchmark, adding 3.6 percent versus an 11 percent rise in Nifty.
It has been very volatile this year, giving positive returns in 5 of the 11 months so far this year and negative in the remaining 6 months. It fell over 13 percent in November, extending losses for the third straight month since September, down almost 24 percent in this period. It rose the most in April, up 30.3 percent, and lost the most in February, down 16.6 percent.
Currently trading at ₹1,542.55, the stock is 31 percent away from its record high of ₹2,240.00, hit on September 9, 2023. It is trading 41 percent higher from its 52-week low of ₹1,092.60, hit on March 28, 2023.
However, in the long term - the last 3 years, it has given multibagger returns, surging 458 percent in this period.
Read here: Why Singhania’s personal woes shouldn't be allowed to destroy shareholder wealth
Earnings
In the September quarter, Raymond reported a marginal rise in its net profit to ₹159.78 crore from ₹158.86 crore in the previous year. While the profit growth was modest, it came amid a delayed festive and wedding season, which typically contributes significantly to the company's sales.
“With the onset of festivities and wedding season, we at Raymond are optimistic that there will be an uptick in consumer demand and overall sentiments should remain positive," said Gautam Hari Singhania.
Revenue from operations grew by 4 percent year-on-year to ₹2,253.4 crore from ₹2,168.2 crore in the same period previous quarter. The company's EBITDA (earnings before interest, taxes, depreciation, and amortization) stood at ₹382 crore, up 7 percent from ₹358 crore in the previous year.
Read here: It's business as usual at Raymond, Gautam Singhania tells staff
“Raymond continues to attest its growth momentum with strong quarter-on-quarter performance and Q2FY24 was the 9th consecutive quarter that reported highest-ever performance both in terms of revenue and EBITDA," the company said.
Is the stock a ‘buy’ at this juncture? Let's take a look:
Fundamental Views
ICICI Securities
The brokerage initiated coverage on Raymond with a ‘hold’ call and a target price of ₹1,860, implying an upside of over 20 percent. The brokerage highlighted rising input costs, a challenging demand environment, and likely increased competition from new players as key risks for the stock.
In a note, ICICI Securities said Raymond's FMCG business’ slump sale, simplification of group structure through potential de-merger of the lifestyle business, doubling the size of engineering business by a foray into sunrise sectors of aerospace, defence and EV through the acquisition of MPPL lifted the stock.
Jefferies
The global brokerage house has a ‘buy’ rating on the stock with a target price of ₹2,600, indicating a massive upside of over 64 percent. It said that Raymond has addressed investor concerns on debt. Raymond is already net cash and is set to list its lifestyle and real estate businesses separately, noted the brokerage.
"Raymond should deliver healthy earnings growth, which in turn can drive a re-rating, especially post-de-merger of lifestyle business. Raymond has seen a significant turnaround in performance over the last three years, especially with respect to profitability and balance sheet quality. Growth is visible across businesses which is led by category expansion and market share gains. We expect Raymond's revenues to grow at a CAGR of 13 percent and earnings to grow at a CAGR of 24 percent over FY23-26," said Jefferies.
Motilal Oswal
The brokerage has a ‘buy’ rating on the stock with a target price of ₹2,600, indicating an upside of over 64 percent. It said that de-merger and capital infusion by the promoter are key drivers for the company. Apart from that, Raymond’s real estate business is also a growth driver, it added. Motilal Oswal expects revenues to grow at a CAGR of 11 percent and EBITDA to grow at a CAGR of 12 percent over FY23-27.
Key concerns for Raymond have in the past revolved around its weak balance sheet, a factor that has hindered its growth potential.
InCred Equities
Raymond saw initiation of coverage by InCred Equities with a target of ₹2,200, indicating an upside of 42 percent. The brokerage said Raymond's restructuring initiatives are in the right direction and the company is well-placed from a growth perspective led by the changes in its leadership, focus on pruning inefficiencies and improving business health.
"Raymond will be demerged into two separate pure-play listed entities post-restructuring, with the lifestyle business comprising textiles, apparel and garment segments to be housed under RCCL post-demerger while the current entity will house the realty, engineering and denim (joint venture) divisions," stated the brokerage.
Technical Views
Rohan Shah, Technical Analyst, Religare Broking Limited
Raymond has been in a severe selling pressure after hitting a life high of 2240 and has tumbled more than 30% thereon. In this process, the stock has slipped below its long-term moving average (200 DEMA) which has acted as a strong support in the past, which also coincides with its previous resistance zone. Going forward, a breakdown below 1500 would propel further selling pressure dragging stock lower towards the 1420 zone. While on the higher side, the 1600-1620 zone is expected to act as strong resistance in the near term.
Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities
“For the past three months, the stock has been under pressure forming a series of lower tops and lower bottoms formation. This signals a shift/ change of the short trend to the downside. Recently, the stock has also decisively broken down its 200-day SMA (1657) on a closing basis, indicating an acceleration of the downtrend. As the stock is sustaining below its 20, 50 and 100-day SMA, it reconfirms bearish sentiments. The daily, weekly and monthly strength indicator RSI is in a bearish zone, which signals a loss of strength on the short to medium-term time horizon. The short to medium-term outlook remains weak, with an expected downside of 1400-1200 levels. Hence, we recommend avoiding fresh long positions at current levels. On the other hand, any small relief rally towards the 1650-1800 levels will remain an exit opportunity for traders,” said Palviya.
Gaurav Bissa, VP, InCred Equities
“After a strong rally, Raymond was seen struggling in the last few weeks. It has witnessed the formation of lower highs and lower lows on the daily charts implying the short-term uptrend has reversed. It has also witnessed a breakdown from a rising trendline pattern in the daily charts which was followed by incremental selling which can take the stock lower. On weekly charts, Raymond is forming three black crow patterns which can push the stock towards 1400 levels. This is expected to be a key support area as 89 EMA as well as Ichimoku kumo supports are placed around that level,” said Bissa.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.
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