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Strong growth across segments

* Raymond’s revenue doubled YoY to INR9.4b, led by strong performance in the real estate segment and the contribution from Maini Precision Products (MPPL), which was acquired on Mar’24.

* EBITDA reported over two-fold growth to INR1b as consol. EBITDA margins improved by 100bp to 10.8%. However, growth in adj. PAT was constrained at 26% due to higher interest costs, leading to a ~350bp decline in PAT margins.

New launches drive strong bookings

* Raymond’s real estate segment bookings jumped 85% YoY to INR6.1b (down 23% QoQ), led by the launch of two phases in Thane — 1) Address by GS Season 2 and Invictus, and 2) its first JDA project in Bandra. Bookings from the Thane land parcel remained stable at over INR4b for the fourth straight quarter. Collections more than doubled YoY to INR4.7b.

* Over last one year, the company has acquired three more society redevelopment projects with cumulative GDV potential of over INR50b. These projects are likely to be launched over the next 12 months. Hence, it expects to a CAGR of 35% in pre-sales over FY24-26E to INR40b.

* Financial performance: Revenue grew two-fold to INR4.9b as the company commenced recognition for its Bandra project. However, EBITDA growth was restricted at 56% to INR850m as margins contracted 560bp to 17.4%.

Engineering segment performance buoyed by MPPL contribution

* Engineering segment revenue doubled to INR4.2b, driven by INR2.2b contribution from MPPL. Excluding MPPL, engineering business revenue declined 5%.

* EBITDA was up 91% at INR550m with margins of 13.2% (down 60bp YoY). Erstwhile engineering business reported a 140bp drop in EBIT margins to 10%, while MPPL generated EBIT margins of 3%.

Highlights from the management commentary

* Demerger status: The company has applied for the demerger of its real estate and engineering businesses and it will take 14-16 months to get the approval. Once approved, both the businesses will be listed separately.

* Real estate: The company expects to launch one more project by the end of Mar’25 and the remaining two will be launched by 1HFY26. Project additions - It targets to add four projects annually with GDV of >INR50b, but with the current visibility, it is confident of adding 2-3 projects with GDV of INR40-50b.

* Engineering: Severe weather conditions, general elections and inflationary environment affected the engineering business performance. It was also impacted by logistic challenges due to lower availability of containers, which affected exports.

Valuation and view

* Raymond has been walking the talk with regards to strategic value creation by selling the FMCG business, demerging the Lifestyle Business, shaping the Real Estate Business, and establishing an engineering unit ‘Newco’ after the MPPL acquisition.

* With the planned de-merger of its real estate and engineering businesses, the company, led by a professional management, can now carve out an individual growth strategy for both its business.

* Given the focus on value creation and its strong growth targets with three-tofour project additions annually, we raise our target FY26E EV/EBITDA multiple for the residential business to 12x.

* Assuming pre-sales of INR40b and 25% EBITDA margin, we arrive at a valuation of INR126b (i.e., INR1900/share). Engineering business is valued at EV/EBITDA of 12x on FY26E, arriving at a value of INR410/share. The combined value of the real estate and engineering businesses works out to be INR2,310/share. Reiterate BUY.

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