Raymond Lifestyle garmenting surge offsets branded weakness as strategic reset advances

1QFY27 Performance: EBITDA Outperformance, but PAT Remains Weak

Motilal Oswal Financial Services Ltd. (MOFSL) describes Raymond Lifestyle’s 1QFY27 performance as decent, with strength in garmenting and cost rationalisation offsetting weakness in the core branded businesses. The broker maintains its Buy recommendation and a target price of Rs 880.

Consolidated revenue rose 6% year on year to Rs 15,155 million, broadly in line with MOFSL’s estimate of Rs 15,086 million. EBITDA increased 17% year on year to Rs 898 million, exceeding the broker’s estimate of Rs 740 million by 21%. EBITDA margin expanded 54 basis points year on year to 5.9%, compared with MOFSL’s estimate of 4.9%.

Reported PAT was a loss of Rs 226 million, compared with MOFSL’s expected loss of Rs 92 million, mainly because of a higher effective tax rate.

Garmenting Drives Growth and Margin Recovery

Garmenting was the principal growth driver. Segment revenue increased 50% year on year to Rs 2,960 million, 25% above MOFSL’s estimate, as Raymond Lifestyle executed its export order book. Segment EBITDA was Rs 216 million, compared with a loss of Rs 81 million in 1QFY26, while the margin reached 7.3% on operating leverage.

Management said capacity was fully booked through December 2026. The order book is supported by US tariff normalisation, new customers in the UK and Europe, and early order benefits from the India-UK FTA. MOFSL expects higher utilisation and cost-plus contracts to support further expansion in garmenting margins, although the global trade environment remains uncertain.

Core Branded Businesses Remain Under Pressure

The core branded portfolio continued to face weakness. Branded Textiles revenue declined 2% year on year to Rs 6,840 million, 6% below MOFSL’s estimate. EBITDA fell 11% and the margin contracted 140 basis points to 13.9%, due to scale deleverage and high raw-material costs.

Branded Apparel revenue increased 4% year on year to Rs 3,490 million, but missed the estimate by 12% because of network consolidation. EBITDA declined 32%, while the margin fell 270 basis points to 5.1%. Raymond Lifestyle closed a net 26 stores during 1QFY27, leaving a retail network of 1,627 stores.

High-Value Cotton Shirting revenue declined 5% year on year to Rs 1,950 million. However, its EBITDA margin expanded 60 basis points to 9.7%, supported by a better product mix.

Emerging Businesses Remain in Investment Mode

Emerging Businesses, comprising Ethnix, Raymond Home, Park Avenue Innerwear, Chairman’s Collection and Sexual Wellness, were reported separately from 1QFY27. Revenue grew 9% year on year to Rs 790 million, led by Raymond Home and Innerwear.

The segment continued to operate in investment mode, reporting an EBITDA loss of Rs 190 million, compared with a loss of Rs 130 million in 1QFY26. The new reporting structure provides a cleaner view of Branded Apparel profitability but reduces comparability with earlier periods.

Strategic Reset Focuses on Profitable Growth

MOFSL views FY27E as a consolidation year for branded apparel. The focus is on store rationalisation, premiumisation, casualisation, channel productivity and profitable growth rather than network expansion.

Management’s wider aspiration is to at least double revenue over the next five years while growing EBITDA faster than revenue. Procurement initiatives, calibrated price increases, higher utilisation and a company-wide cost-transformation programme are expected to mitigate raw-material inflation and improve margins.

MOFSL expects store rationalisation, cost transformation and operating leverage to deliver approximately 100 basis points of EBITDA-margin expansion over FY26-FY28E. However, the broker notes that a material recovery in domestic branded demand is likely to be gradual.

Estimates and Valuation

Reflecting the slower recovery in the branded businesses, MOFSL reduced its FY27E and FY28E revenue estimates by 1.7% and 2.8%, respectively. Pre-Ind AS EBITDA estimates were cut by 9.1% and 11.9%, while PAT estimates were reduced by 22.1% and 15.8%.

The broker forecasts FY26-FY29E compound annual growth rates of 7% for revenue, 12% for pre-Ind AS EBITDA and 19% for PAT. Its target price of Rs 880 is based on 20 times September 2028E EPS. At approximately 15 times FY28E EPS, MOFSL believes the valuation offers reasonable downside support while Raymond Lifestyle executes its strategic reset.

Key Risks to the Investment Thesis

• A slower recovery in branded demand.
• Continued raw-material cost pressure.
• Sustained losses in emerging businesses.
• Weak execution of store and network optimisation.