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Cost pressure dents 2Q, but apparel recovery and garmenting scale-up boost 2H outlook

* Raymond Lifestyle (RLL) delivered a mixed 2Q performance, with revenue at INR20.8b (5% beat) but EBITDA at INR2.2b (7% miss), as higher brand spends and elevated high raw material and freight costs weighed on margins.

* Garmenting continues to drive growth, supported by an order book through mid-Feb’27, rising European traction and early benefits from the India-UK FTA. Hindupur capacity expansion (3 to 10 lines) and the proposed EU FTA should help RLL sustain growth in the next two years.

* Branded apparel showed early signs of recovery with 20% growth, led by strong secondary sales and casualization. 2H is likely to be stronger as festive demand shifts to 3Q, wedding dates remain favourable and freshseason price increases flow through.

* RLL reiterated its FY27 guidance of double-digit revenue growth and middouble-digit EBITDA growth, with 2H acceleration expected from festive demand, fresh-season price increases and operating leverage. However, 1H EBITDA growth of 2% leaves a meaningful step-up required in 2H to achieve the full-year target.

* We raise our revenue estimates by 3-4% for FY27–29E and pre-IND AS EBITDA by 4%/9% for FY28/29E, reflecting stronger garmenting and branded apparel momentum, while near-term raw material inflation and brand investments remain elevated. We build in revenue/pre-IND AS EBITDA/PAT CAGR of 8%/16%/26% over FY26-29E.

* We maintain BUY with a TP of INR700, based on 15x Dec’28E EPS. After a ~50% YTD fall, RLL’s INR30b market cap is below its adjusted book value (INR48b) and net block plus investments (INR36b), creating a compelling valuation disconnect.

Highlights from the management commentary

* Branded apparel: Secondary sales remained strong, with like-for-like growth of 14% pre-Dussehra and 26% YoY growth in ColourPlus. Margins were stable at 8.8% despite brand spends rising to 7.2% (vs. 6.8% YoY) of B2C sales and high input costs. Fresh-season price increases, operating leverage and cost savings should drive margins toward double digits.

* Garmenting: Order visibility has strengthened, with factories booked through Jan'27 and bookings underway for Feb'27. Capacity utilization is already above 90%, while Hindupur expansion from three to 10 lines (set at INR700m capex) should support growth over the next two years. Europe revenue grew 50% YoY in 2Q (30% in 1H) on a low base. UK orders are boosted by the FTA.

* Guidance: Management reiterated FY27 guidance of double-digit revenue growth, mid-double-digit EBITDA growth and double-digit PBT growth. 1H revenue and EBITDA grew 10% and 6%, respectively, implying a stronger 2H as the festive calendar shifts to 3Q and fresh-season price increases flow through.

Valuation and view

* RLL’s cash-generating textile franchise continues to fund investments in branded businesses, while Garmenting is emerging as a structural second growth engine. Global sourcing realignment, the UK/EU FTAs and ongoing capacity expansion should help RLL scale up its export platform, built around higher-value suits and jackets.

* Branded apparel is transitioning from consolidation to growth, led by casualization, premiumization and deeper penetration. A leaner store network and continued brand investments should support ~140bp margin improvement over the next two years.

* We raise our revenue estimates by 3-4% over FY27–29E and pre-IND AS EBITDA by 4%/9% for FY28/29E, reflecting stronger garmenting and branded apparel momentum, while near-term raw material inflation and brand investments remain elevated. We build in revenue/pre-IND AS EBITDA/PAT CAGR of 8%/16%/26% over FY26–29E.

* We maintain BUY with a TP of INR700, based on 15x Dec’28 EPS. After a ~50% YTD fall, RLL’s INR30b market cap is below its adjusted book value (INR48b) and net block plus investments (INR36b), creating a compelling valuation disconnect

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