A day after corporate action, shares of Raymond Ltd climbed 5 per cent in Friday's trade on hopes demerger of the company's businesses would further unlock value for investors. To recall, the Raymond stock turn ex-lifestyle business on Thursday. Investors who had Raymond shares on July 11, the record date, would be eligible for Raymond Lifestyle shares when it gets listed on stock exchanges in the next two months.
On Friday, Raymond shares rose 4.76 per cent to hit a high of Rs 2,145 on BSE. Post demerger, the stock tested the level of Rs 1,800 from where the recovery started on Thursday. Anand Rathi said one can place a stop loss at Rs 1,800 on Raymond for the upside target of Rs 2,400.
Existing investors of Raymond would get four shares of Raymond Lifestyle for every five Raymond shares.
After Lifestyle, Raymond is looking to demerge real estate business, which may take 15-18 months to complete. When the whole demerger process gets completed, the Raymond entity would comprise only the Engineering business. The share exchange ratio for real estate business is fixed at 1:1.
Raymond has been one of Systematix Institutional Equities' high conviction ideas for a while, but Raymond's stock price surpassed its target price. The key reason for the massive re-rating, it said, is the market realising the potential of the non-lifestyle growth levers – real estate and engineering, which were underappreciated so far but came to the fore with the demerger announcements.
On lifestyle, it said the business was also seeing a re-rating given the realisation that it is a predominantly B2C business trading near valuations of a B2B apparel business. "We revise our estimates upwards for the real estate and engineering businesses to factor in the traction in new JDA project signing and focus on the aerospace/defense segments respectively," Systematix said in a June 6 note.
The brokerage has a fair value of Rs 2,293 for the lifestyle business valuing branded textiles, branded apparel and B2B businesses at 10 times, 15 times and 8 times FY26E EV/Ebitda. It ascribed a fair value of Rs 1,076 to the real estate business.
On 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.
"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.