Raymond Ltd shares are in focus of late as value unlocking is at play, with the first leg of demerger starting soon. Raymond Lifestyle will be the first to see action, with record date fixed as Jul 11. Analysts see the stock to get listed by August or September.
Besides, Raymond has proposed the demerger of its real estate business with a 1:1 share exchange ratio between Raymond and Raymond Realty.
In the recent past, the company took some positive measures including selling of its the FMCG business, ramping up the real estate business, and acquiring Maini Precision Products. This is all reflective in the Raymond stock price that has appreciated 77 per cent in 2024 so far.
InCred Equities said the management’s focus on running three pure play businesses under a separate professional-led leadership indicates scope for improvement across verticals. The demerger of real estate business is expected to take 12-15 months to fructify, InCred Equities said. By the end of 12-15 months, there will be three pure play Raymond entities, it said.
The Raymond’s management has stated that once its businesses reach a certain scale, they will be made into pure-play entities.
On Raymond's real estate business, Antique Stock Broking said the business is going strong with the Pokhran Road project already an established landmark project in Thane. With steady business development under the asset-light model, it expects Raymond Realty to continue with 25 per cent CAGR in sales booking with embedded EBITDA margin of over 30 per cent.
This brokerage maintained 'Buy' on Raymond and suggested a revised target price of Rs 3,905 from Rs 2,670 earlier.
"The next value unlocking initiative is expected under the engineering division, after the acquisition of Maini Precision Products (MPPL) for Rs 6,820 crore, which will be split into two subsidiaries, one housing the aerospace & defence (A&D) business of MPPL and the rest consolidated under a single entity. The Raymond group aims to double the A&D business, which currently garners Rs 270 crore in revenue over 3-4 years led by aircraft components business & targets to retain 25-26 per cent Ebitda," InCred Equities said.
Buying opportunity? The brokerage has raised its target price on Raymond to Rs3,650 and maintained its 'ADD' rating on Raymond on account of the strong traction in real estate business, aided by new JDAs beyond the Thane land parcel and value unlocking of the engineering business.
It values the lifestyle business at Rs 1,982, the realty business at Rs 1,086 and engineering business at Rs 499 per share.
"As per the first leg of the demerger, we expect Raymond/RLL to have a fair value of Rs 1,586/Rs 1,982, respectively. We believe any mispricing of Raymond after the first demerger (post 11 July 2024), below our estimated fair value, would present a buying opportunity," it said.
MOFSL said per share value of Raymond will be Rs 1,415 after the record date, which would includes Rs 1,200 of real estate and Rs 215 of the engineering business. The Lifestyle business could be listed at Rs 2,930 per share, it said.
"The combined value of the three businesses works out to be Rs 3,755 per share. We retain Buy rating on the stock," MOFSL said.