Raymond shares: Brokerage raises target price for multibagger stock by up to 50%

Shares of Raymond continue to hog limelight on Dalal Street as the multibagger counter extended its gains after the company announced to demerge its real estate entity. Brokerage firms, those tracking the counter, continue to remain positive on the stock and have pushed their target prices upwards.

The textile major in an exchange filing last week announced a vertical demerger of its real estate business into its wholly-owned subsidiary Raymond Realty. "Upon completion of this demerger, Raymond Ltd and Raymond Realty (RRL) will operate as separate listed entities within the Raymond Group post all statutory approvals," said the company.

The move aims to simplify the corporate structure and enhance shareholder value for operational and structural benefits. "The new entity will seek automatic listing on stock exchanges and according to the scheme of arrangement, each Raymond shareholder will receive 1 share of RRL for every 1 share held in Raymond," added the filing.

Shares of Raymond Ltd surged 18 per cent in Friday's session to hit a new 52-week high at Rs 3,484, but finally settled at Rs 3,226.70 for the session. However, the stock extended its gains on Monday to Rs 3417.45, rising 6 per cent over its previous close during the session.

Since its real estate foray in FY20, Raymond Realty has sold more than Rs 61,50 crore inventory, predominantly in its Thane project. Sales bookings have grown at a CAGR of 25 per cent in FY20-24 and closed at Rs 2,250 crore in FY24. The company has a legacy land parcel of 100 acres on Pokhran Road, prime real estate in Thane, said Antique Stock Broking.

"It has six ongoing projects on 40 acres of a total of 100 acres in Thane; the remaining 7.4 million sq feet on 60 acres is upcoming. Additionally, the company added four projects with a GDV of Rs 7,100 crore under the asset-light model in MMR. We expect the company's sales booking to continue to grow at 25 per cent CAGR and surpass Rs 3,000 crore in FY25 and Rs 4,000 crore by FY27," it said.

Shares of Raymond have zoomed near 1,500 per cent from its covid-19 lows around Rs 220 per share, while the stock has surged about 135 per cent from its 52-week low at Rs 1,487 hit on December 1, 2023. The stock has doubled investors wealth in the year 2024 so far. It is up 36 per cent in the last one month.

"With no debt in the realty business and a strong brand driving development and sales, we believe Raymond Realty is up for re-rating and should trade at a significant premium to NAV. We value Raymond Realty on an EV/EBITDA multiple of 10 times on embedded Ebitda of 1HFY27 and value the realty business at Rs 10,380 crore We keep our non-real estate business estimates unchanged," Antique added.

After a series of positive measures such as selling the FMCG business, demerging the lifestyle business, ramping up the real estate business, and acquiring Maini Precision Products (MPPL), RAYMOND has proposed the demerger of its real estate business, said Motilal Oswal.

"We believe the demerger will unlock the value of the real estate business. Raymond Group will now have three separate listed entities: Lifestyle, Real Estate and Engineering, and each of them will be professionally managed separately. Furthermore, the group will maintain its net cash status," it said.

Post the demerger announcement, Antique has increased its target price by nearly 47 per cent to Rs 3,905 from Rs 2,670 earlier. Similarly, Motilal Oswal has a target price of Rs 3,755 on the stock. Both brokerages suggest a 'buy' recommendation to investors on the stock.