Investment Advisory Research

February 3, 2006

Raymond Ltd December quarter result update

Market Outperformer (Rs. 411)

BSE Code 500330 Financial Highlights

q For the quarter ended December 31, 2005 (Q3 FY06),
NSE Code RAYMOND
the turnover was at Rs.345.3 crores, a growth of
Reuters Code RYMD.BO 15.5% over the third quarter last year (Q3 FY 05) on
Equity Capital Rs.61.4cr a standalone basis. For the nine-months ended
Face Value Rs.10 December 3 1, 2005 (9M FY06) the company reported
Market Cap Rs.2523 cr a turnover growth of 14% over the same period last
year.
52 Week H/L Rs.439 /286
q Operating profits increased by 44.9% to Rs.58.9
BSE SENSEX 9844 crores during the quarter (Q3 FY06) as compared to
Stock Performance Rs. 40.7 crores in Q3 FY05. OPM’s increased sharply
to 17.1% (Q3 FY06) compared to 13.6% (Q3 FY05)
on the back of improved realisations in the textile and
files business, change in product mix combined with
lower input costs of major raw materials.
q PAT after extraordinary items stood at Rs. 30.6 crores
in Q3 FY06 against Rs. 10.1 crores during the same
period last year after taking into consideration the
following exceptional items during the quarter
(Q3 FY06).
• Surplus on disinvestments of carded woolen
unit at Jalgaon (Rs.9.96 crores).
• Discount on prepayment of Sales Tax
deferment Loan (Rs.0.96 crores).
• Provision for diminution in value of Long
Financial Snapshot (Rs. Cr.) Term Investments (Rs.-12.44 crores).
Particulars FY05 FY06E FY07E • VRS / One time settlement (Rs. -0.95 crores).
Total income 1524.5 1791.2 2163.1
Net Profit 88.2 146.3 203.8 Textile Division
Net Profit growth (%) (35.3%) 65.9% 39.3% q The textile division’s business grew by 10.6% in
EPS (Rs.) 14.4 23.8 33.2 Q3 FY06, the turnover for the division stood at
EPS growth (%) (35.3%) 65.9% 39.3% Rs. 224.12 crores in Q3 FY06. Volume growth in the
P/E (x) 28.6 17.2 12.4 segment was around 8%.
P/BV (x) 2.1 2.0 1.8 q The export sales of the division declined by 22% to
RONW (%) 7.5 11.4 14.2 Rs. 18 crores in Q3 FY06 and accounted for 8% of
Div. Yield (%) 1.1 1.9 1.9 the textile division’s turnover. However, the
Shareholding Pattern management is confident of making up the shortfall in
the ensuing quarters.
19.8% q The PBIT margins of the division expanded
35.0% significantly to 26.5% in Q3 FY06 compared to 14.5%
in Q3 FY05 mainly driven by increase in unit
realizations by over 7% y-o-y and richer product mix.
12.7%

32.6%

Promoter FIs, MFs and Banks

FIIs, OCBs and NRIs Public

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 Textiles PBIT and Margins
70.0 30.0%
60.0 19.4% 22.5%
26.5% 25.0%
50.0 17.9% 20.0%
40.0 14.5%
15.0%
30.0
20.0 10.0%
10.0 5.0%
0.0 0.0%
Q305 Q405 Q106 Q206 Q306
PBIT (Rs.cr) Margins (%)

Files & Tools Division:

q The business of this division grew by 8.1% during the quarter to Rs. 38.53 crores. The growth in revenues was mainly on
account of increase in sale of drills by 52%.
q Export sales were at Rs.21.46 crores, an increase of 14% over same quarter of the previous year. Exports now represent
52% of the division’s turnover.
q The PBIT margins of the division increased from negativ e 5.67% in Q3 FY05 to 7.73% in Q3 FY06. Growth in profitability
was driven by increase in realizations of drills by 20% and savings obtained from restructuring of Thane unit of the
division.

Denim Division:
q Denim division grew by 40.4% during the quarter to
Rs.81.47 crores (Q3 FY06) from Rs. 58.01 crores in Q3 Denim PBIT and Margins
FY05. The growth in revenues was mainly attributed to 10.0 13.6% 15.0%
increase in volume growth of 47% during the quarter. 11.4% 10.8%
8.0
q The PBIT margins of the division stood lower at 10.83% 9.1% 10.0%
during the quarter (Q3 FY06) compared to 13.6% in 6.0
6.5%
Q3 FY05 mainly due to drop in realisations by 4% on 4.0
the back of change in market mix. 5.0%
q Export sales accounted for 41% of the turnover 2.0
compared to 62% for the same quarter of the previous 0.0 0.0%
year. Q305 Q405 Q106 Q206 Q306
q Growth in profitability was driven by increase in volumes
from expanded capacity and lower cotton costs. PBIT (Rs.cr) Margins (%)
q The cotton consumption rate was lower by 21% over
the same quarter of the previous year.

Subsidiary Performance:
q Raymond Apparel recorded a turnover of Rs.57.98 crores for the third quarter ended December 31, 2005 representing a
growth of 10% over same quarter of previous year. PBT was at Rs.9.53 crore s, an increase of 110% over same quarter
last year.
q Colorplus Fashions Ltd. recorded revenue of Rs.26.7 crore during the quarter; a growth of 7% over same quarter of
previous year. PBT was at Rs.6.4 crore, a decrease of 6% over same quarter last year.
q Silver Spark Apparel Ltd registered revenue of Rs.17.37 crore for Q3 FY06 and the company continues to cater to the
requirement of major international brands and is in the process of diversifying its customer profile. There has been steady
progress in both capacity utilization and labour efficiencies in the division.

Outlook:
The Company’s investment programmes to consolidate its position as the leading integrated player in the textile and apparel
business is proceeding as planned. With international markets opening up as a result of quota abolition, the Company will
continue its thrust on exports and with the commissioning of the world -class garmenting facilities of its subsidiaries. The
company going forward will be in a position to offer a one-stop shop service to its international customers and is taking
aggressive steps to capitalize on vast opportunities in the textile industry.

Growth for the compan y is likely to continue on the back of higher realisations due to improved product mix, drop in input
costs and expansion in volumes due to capacity additions in denim as well as worsted textiles. At CMP of Rs 411, the stock
trades at a P/E multiple of 17.2x FY06E and 12.4x FY07E earnings. We maintain our Market Outperformer rating on the
stock.

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FINANCIAL SUMMARY

( Rs. Crs. )
Year end March 31 Q3 ‘05 Q3 ‘06 9M ‘05 9M ‘06 FY05* FY06E* FY07E*
Sales 298.9 345.3 825.1 940.5 1440.1 1731.2 2103.1
Sales growth (%) 15.5% 14.0% 14.3% 20.2% 21.5%
Total expenditure 258.3 286.4 741.8 794.7 1282.3 1485.3 1771.9
Operating profits 40.7 58.9 83.3 145.8 157.8 245.8 331.2
Other income 15.8 14.1 50.6 53.5 84.4 60.0 60.0
PBDIT 56.5 73.0 133.9 199.3 242.2 305.8 391.2
Interest (net) 4.9 6.9 12.1 17.8 30.7 37.8 31.5
Depreciation 16.5 18.8 43.8 53.4 70.7 78.0 88.0
Exceptional items 17.0 2.5 24.3 10.1 25.0 0.0 0.0
Profit before tax 18.1 44.9 53.7 118.0 115.9 190.0 271.7
Tax 8.0 14.3 15.0 31.8 27.7 43.7 67.9
Profit after tax 10.1 30.6 38.7 86.2 88.2 146.3 203.8
Growth in PAT (%) 204.0% 122.6% -35.3% 65.9% 39.3%

Equity (Face Value = Rs. 10) 61.4 61.4 61.4 61.4 61.4 61.4 61.4

Ratio Analysis
Profitability ratios (%)
OPM (excl. other income) 13.6 17.1 10.1 15.5 11.0 14.2 15.8
NPM 3.2 8.5 4.4 8.7 5.8 8.2 9.4
Per share data (Rs.)
Cash EPS 9.9 8.8 21.4 26.0 34.0 36.5 47.5
EPS 1.6 5.0 6.3 14.0 14.4 23.8 33.2
BV 191.4 208.5 233.9
DPS 4.0 5.0 5.0
Return Ratios (%)
RONW 7.5 11.4 14.2
ROCE 8.1 10.7 14.1
Valuation ratios (x)
P/E 28.6 17.2 12.4
P/BV 2.1 2.0 1.8
EV/EBIDT 13.1 11.0 8.3

* Year ending results and expectations are consolidated.

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 Rating Summary

Market Outperformer Over the next 12 months, we expect the stock’s returns to be >10% relative to the BSE Sensex.
Market Performer Over the next 12 months, we expect the stock’s returns to be between –10% and +10% relative to the BSE Sensex.
Market Underperformer Over the next 12 months, we expect the stock’s returns to decline >10% relative to the BSE Sensex.

Disclaimer Clause

This document has been prepared by IL&FS Investsmart Limited (the Company) and is being distributed in India by the Company, a registered
broker. The information and views contained in the document have been compiled from sources believed to be reliable and have been expressed
by our analyst(s) as an independent opinion and may not be necessarily endorsed by the management. The Company does not warrant its
accuracy, completeness and correctness. This document is not, and should not be construed as, an offer to sell or solicitation to buy any
securities. This document is intended only for the addressee and as such should not be reproduced, distributed or published, in whole or in part,
by any recipient hereof for any purpose without prior permission from the Company. This document is not intended to be published or distributed
in any country, which prohibits such publication under its laws. If the recipients of communication/report through e-mail, by any chance, are in
the countries, which prohibit such publication under its laws, they are requested to refrain from accessing such e-mails and inform the Company
accordingly.

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