Hold Raymond Ltd For Target Rs.1,152 by InCred Equities
Raymond (RAYMOND), now a pure-play engineering company after the demerger of its lifestyle and realty businesses, reported 2QFY27 revenue from operations of INR 655 Cr (+24.2% YoY, +8.2% QoQ), led by a record quarter in Aerospace & Defence (A&D), which grew 72% YoY to INR 139 Cr. Precision Technology & Auto Components (PT&AC) grew 15% to INR 471 Cr. EBITDA excluding other income rose 74.1% YoY to INR 75 Cr at an 11.5% margin (+330 bps YoY), but fell 2.6% QoQ as gross margin slipped 125 bps on higher manufacturing costs. Reported EBITDA, which includes INR 28 Cr of other income, was INR 103 Cr (+30% YoY). PAT was INR 32 Cr (+131% YoY) against a base quarter distorted by a INR 167 Cr exceptional charge and a INR 162 Cr tax credit. Management guided for sustainable A&D growth in the mid-to-high 20s, raised the revenue potential of the existing Bengaluru aerospace facility to INR 700–750 Cr and kept the Andhra Pradesh greenfield on track for December 2027. We rate the stock HOLD with an SOTPbased TP of INR 1,152 (6% upside), valuing PT&AC at 15x and A&D at 40x FY28E EBITDA.
Key Business Highlights
* Aerospace at a Record: Revenue of INR 139 Cr grew 72% YoY and 14% QoQ with EBITDA margin steady at 21.0%; A&D is now 21% of revenue from operations, up from 15% a year ago.
* PT&AC Steady: Revenue up 15% YoY to INR 471 Cr; EBITDA of INR 61 Cr rose 39% YoY excluding the ~INR 13 Cr land gain in the base quarter, with OEM (B2B) revenue up ~17–18%.
* Sequential Margin Dip: EBITDA margin excluding other income fell 127 bps QoQ to 11.5%; manufacturing and operating costs rose 12% QoQ against 8% revenue growth.
* Other Income Flatters the Headline: INR 28 Cr of other income is ~27% of reported EBITDA of INR 103 Cr; excluding it, the Others segment (aviation and corporate) posted an EBIT loss of INR 2 Cr.
* Capacity Ahead of the Greenfield: Nozzle guide vane capacity doubles to 16,000 units a year with revenue from 4QFY27; ~INR 400 Cr of the INR 1,000 Cr Andhra Pradesh commitment will be spent by December 2027.
Valuation at a Glance
* We rate Raymond HOLD with an SOTP-based target price of INR 1,152 (6% upside), valuing PT&AC at 15x and A&D at 40x FY28E EBITDA. We model FY27E/FY28E revenue of INR 2,594 Cr/2,989 Cr, EBITDA (excluding other income) of INR 319 Cr/395 Cr at margins of 12.3%/13.2% and EPS of INR 13.4/14.9. At the CMP of INR 1,089, the stock trades at 82x/73x FY27E/FY28E EPS.
Above views are of the author and not of the website kindly read disclaimer
