Raymond - Real Estate Demerger Another Solid Value Creation Initiative: Systematix

Systematix Research Report

Raymond Ltd. stock has been a tear over the past month with the lifestyle business demerger date getting closer ( July 11). The stock got a further boost post the announcement of demerger of the real estate business on July 05, which drove the stock up 10% on Friday, leading to a 49% gain in the past month.

It has been one of our high conviction ideas for a while, but our target price has been surpassed well ahead of our expectations. The key reason for this massive re-rating in our view is the market realizing the potential of the non-lifestyle growth levers – real estate and engineering, which were underappreciated so far but have now come to the fore with the demerger announcements.

In addition, the lifestyle business is also seeing a re-rating given the realization that it is a predominantly B2C business trading near valuations of a B2B apparel business, which we believe has more legs to run.

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