Company Update : Raymond Lifestyle Ltd By Motilal Oswal Financial Services Ltd
Below our conservative estimates due to weak margins
* Raymond Lifestyle’s (RLL) consolidated revenue was up by a modest 2% YoY at INR17.5b (2% miss) in 3QFY25.
* RLL opened 61 new stores (incl. 14 Ethnix by Raymond stores) in 3Q, taking its total retail store network to 1,653 stores (up 9% YoY).
* Gross profit declined 5% YoY to INR7.5b (10% miss) as gross margin declined 290bp YoY to 42.5% (350bp miss).
* EBITDA declined 37% YoY to INR1.8b (-16% QoQ, 26% miss) due to higher employee (+4% YoY) and other (+21% YoY) expenses.
* EBITDA margin contracted 620bp YoY to 10.2% (~325bp miss).
* Depreciation and amortization rose 34% YoY, while finance cost jumped 24% YoY.
* Reported PAT declined 60% YoY on lower EBITDA, higher D&A and a high tax rate.
* RLL noted that it has once again become net debt free with net cash of INR0.61b (vs. INR5.7b net debt in 2Q). This is likely driven by better secondary sales and thereby improved collections in 3QFY25.
* Further, RLL’s net working capital improved to 89 days (vs. 97 days in 2Q).
Segmental performance:
* Branded Textile: Revenue at INR8.6b (2% miss) declined ~6% YoY (vs. -8% YoY in 2Q) on account of continued weakness in customer demand. EBITDA declined 22% YoY to INR1.5b (14% miss) as margin contracted 360bp YoY to 18% (250bp miss) on account of operating deleverage.
* Branded Apparel: Revenue at INR4.6b (6% miss) inched up 5% YoY as 9% YoY store addition was offset by a likely decline in SSSG as market conditions remained challenging amid muted consumer demand. However, EBITDA at INR440m (30% miss) declined 28% YoY as margin declined 430bp YoY to 9.6% (340bp miss) due to upfront investments in retail store expansions.
* Garmenting: Revenue at INR3.1b (5% beat) grew 10% YoY. However, EBITDA declined 21% YoY to INR240m (16% miss) as margin declined 300bp YoY to 7.8% (195bp miss) on account of an adverse sales mix, higher freight costs and additional costs for the new lines.
* High-Value Cotton Shirting (HVCS): Revenue at INR2b (in line) declined ~6% YoY. EBITDA declined 11% YoY to INR207m (26% miss) as margin contracted 60bp YoY to 10.3% (70bp miss) on account of operating deleverage.
Management commentary:
* 3Q was a challenging quarter amid weak consumer demand and subdued sentiment.
* RLL expanded into the innerwear category by launching Park Avenue Innerwear, which has received positive feedback from the trade channel.
* After two quarters, RLL has once again turned net debt free in 3QFY25.
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