Tata Mutual Fund-Backed Stock Gets Buy Call From SBI Securities: Do You Own?

A mid-cap company in the consumer discretionary industry is called Raymond. The brokerage company SBI Securities has suggested buying the S&P BSE 500 stock at a target price of Rs 1,762 per share. Raymond is a multifaceted corporate conglomerate that operates in several industries such as textiles, apparel, FMCG, real estate, engineering, and pharmaceuticals.

For the last 90 years, Raymond has been recognised for providing its customers with products of the highest calibre, all thanks to its powerful brand. SBI Securities has recommended to buy Raymond at the current market price (CMP) and have set a target period of 12 months, which implies a potential upside of around 15%.

Reasons To Buy Raymond

As per a report released by SBI Securities, here are the 5 reasons which investors should consider before buying Raymond shares.

Despite muted domestic demand outlook; Delivered highest revenue and EBITDA:

The company, despite muted domestic demand, has reported highest revenue and EBITDA at Rs 2,321 cr and Rs 386 cr up 6%/8% YoY respectively. The profit for 2QFY24 is not comparable to 1QFY24 as 1st quarter profit also included profit from sale of FMCG business. The 2nd quarter is seasonally weak quarter for the company.

The subdued domestic consumer demand was due to low consumer sentiments as discretionary spending impacted on account of inflationary pressures and higher commodity prices. Also delayed in festival and wedding on account of Adhik Maas too impacted the domestic demand environment.

Real estate continued to demonstrate sustained demand:

Residential real-estate continued to demonstrate sustained demand including high demand for luxury homes. The company has taken initiatives like emphasis on collections and efficient inventory management and related production cycle to optimize NWC. Thane (100 acres) land development has total revenue potential of Rs 25,000 cr. Nearly 40 acres of land is under development for revenue potential of Rs 9000 cr while 60 acres (~7.4 million sqft) has another saleable potential of Rs 16,000 cr.

Turned debt free 2 years ahead of the guidance:

The company post sale transaction of its FMCG business is presently turned debt free with net cash position of Rs 1,100 cr as of Sep'23. It sold FMCG business for sale proceed of Rs 2,825 cr in May'23 and has realized Rs 2,200 cr net tax amount. Additionally, Raymond issued NCD of Rs 1,700 cr to RCCL to facilitate the repayment of external debt of Rs 1,029 cr in 1QFY24.

Go to market strategy for textile segment:

The company has taken go to market initiatives for its Suiting, Shirting, Apparel, Ethnix segment in textile division. It is building hyper personified interaction BOT - ETHINX that provides seamless flow of customer journey using WhatsApp based interaction through direct button featured across text, video, image etc. The company has made 46 net store additions during the quarter to take total at 1,453 as of Sep'23 v/s 1,376 in Sep22. Raymond plans to open 200 retail store in next 12-18 months.

Attractive valuation:

At the current price, the stock is trading at a PE multiple of 13.9x/11.7x of its FY24E/FY25E Bloomberg consensus earning estimate.

Raymond Shareholding Pattern

As per the shareholding pattern of the company for July to September quarter, ace investor Mukul Mahavir Agrawal held fully paid-up equity shares of 10,00,000 or 1.50% stake in the company whereas in Q2FY24 Tata Mutual Fund- Tata Equity P/E Fund held 7,96,720 shares or 1.20% stake and Nippon Life India Trustee Ltd-A/C Nippon India Small Cap Fund held 10,86,547 shares or 1.63% stake in Raymond.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.