Motilal Oswal Financial Services has reiterated its “BUY” recommendation on Raymond Lifestyle with a target price of Rs 1,060, implying an upside potential of nearly 31% from the current market price of Rs 812. Despite a disappointing fourth-quarter earnings performance marked by weaker margins and one-off inventory-related charges, the brokerage believes the company’s legacy textile franchise, improving garmenting recovery, and disciplined execution could drive a strong profitability rebound over the next two fiscal years. Raymond Lifestyle is entering FY27 with a sharper focus on premiumization, operational efficiency, store rationalization, and sustainable growth rather than aggressive expansion, positioning the company for a gradual but meaningful turnaround in earnings quality.

Motilal Oswal Reaffirms Buy Call on Raymond Lifestyle

Raymond Lifestyle’s long-term fundamentals continue to attract brokerage confidence despite near-term volatility. Motilal Oswal maintained its positive stance on the stock after the company delivered mixed FY26 results, arguing that the structural earnings trajectory remains intact.

The brokerage assigned a target valuation based on 20x FY28 estimated earnings per share, arriving at a fair value target of Rs 1,060 per share. At the current market price of Rs 812, analysts see substantial upside supported by improving operational leverage and stronger execution across branded textile and garmenting businesses.

Fourth-Quarter Earnings Miss Expectations on Margin Pressure

Raymond Lifestyle posted a softer-than-expected operational performance in the March quarter. Consolidated revenue rose 19% year-on-year to Rs 17.7 billion, driven primarily by stronger domestic demand and robust growth in branded textiles. However, profitability lagged expectations due to declining gross margins and elevated operating costs linked to brand investments and network restructuring.

EBITDA for the quarter stood at Rs 1.2 billion, significantly below brokerage expectations, while EBITDA margins came in at 6.7%. Gross margins contracted approximately 115 basis points year-on-year to 40.6%.

The company also booked an exceptional expense of nearly Rs 700 million related to inventory loss allowances in the apparel segment, which materially affected bottom-line profitability. Adjusted profit after tax rose around 16% year-on-year to Rs 521 million, though it remained substantially below analyst projections.

Textile Business Continues to Anchor Stability

The company’s legacy textile division remains the strongest earnings engine within the portfolio. Branded textile revenue increased nearly 14% year-on-year to Rs 8.3 billion during the quarter, supported by healthy premium fabric demand and volume expansion.

Although margins softened sequentially, the division still generated EBITDA margins of 13.9%, reflecting the resilience of Raymond’s core franchise. For the full fiscal year, branded textile revenue climbed 14% to Rs 34.3 billion, while EBITDA surged 46% year-on-year with margins expanding to 17.8%.

Management highlighted strong traction in premium categories such as linen and wool-based products, alongside growing demand for casualwear fabrics. The company continues to emphasize premiumization and product-mix enhancement as central strategic pillars.

Garmenting Recovery Emerges as a Key Growth Catalyst

The garmenting business delivered one of the strongest recoveries across Raymond Lifestyle’s segments. Segment revenue jumped 38% year-on-year to Rs 3.4 billion during the quarter, significantly outperforming expectations.

Management indicated that March marked the highest-ever monthly revenue for the garmenting business, supported by improved trade conditions in the United States and stable client retention trends. Order visibility also remains encouraging, with first-quarter capacity fully booked and second-quarter demand progressing steadily.

The brokerage expects normalization in global sourcing trends and improving trade agreements, including the India–EU Free Trade Agreement, to further strengthen export competitiveness for Raymond’s garmenting operations over the medium term.

Branded Apparel Business Remains Under Pressure

While revenue momentum in branded apparel remained healthy, profitability continues to face challenges. The segment reported 20% revenue growth to Rs 4.7 billion, driven by improved performance across exclusive brand outlets, multi-brand outlets, and online channels.

However, EBITDA margins remained subdued at 3.9% due to elevated marketing expenditure and weaker productivity from newly opened stores. Management acknowledged that FY27 would likely remain a consolidation phase for the apparel business as the company shifts focus toward profitability and channel productivity rather than aggressive retail expansion.

Raymond plans approximately 100 gross store additions in FY27 but will simultaneously rationalize weaker-performing outlets, resulting in a net addition of only 30–40 stores.

Operational Discipline Begins Improving Cash Flow Profile

One of the most encouraging signals from FY26 was the improvement in working capital efficiency. Working capital days reduced from 87 days to 77 days during the fiscal year, supported by tighter inventory controls and improved collections. Management is targeting sub-70 working capital days in FY27.

The company generated operating cash flow of nearly Rs 5.5 billion during FY26 despite elevated capex spending of approximately Rs 1.8 billion. Key investments included SAP implementation, Hyderabad garmenting facility expansion, and routine maintenance expenditure.

Financial Outlook Suggests Margin Expansion Ahead

Motilal Oswal expects Raymond Lifestyle to deliver strong earnings acceleration between FY26 and FY28. The brokerage projects revenue, EBITDA, and PAT CAGR of 10%, 28%, and 45%, respectively, over FY26–FY28.

The report also forecasts EBITDA margin expansion of nearly 230 basis points over the next two years as store rationalization, tighter cost controls, and operational efficiencies begin reflecting more visibly in profitability metrics.

Below is a snapshot of key forward projections:

Valuation Looks Attractive Despite Near-Term Risks

Analysts believe Raymond Lifestyle’s current valuation already factors in most near-term concerns. The stock trades at roughly 15x FY28 estimated earnings, which Motilal Oswal considers attractive given the company’s strong textile franchise, improving garmenting outlook, and balance-sheet stability.

The brokerage nevertheless acknowledged several risks, including slower-than-expected demand recovery, sustained weakness in branded apparel margins, and continued losses in emerging businesses that currently generate approximately Rs 1.4 billion in revenue while incurring losses of around Rs 0.8 billion.

Investment Outlook

Raymond Lifestyle appears to be transitioning from a volatile restructuring phase toward a more stable profitability cycle. While the fourth-quarter numbers disappointed on the operational front, management’s emphasis on disciplined expansion, premiumization, working-capital optimization, and margin improvement could strengthen earnings quality over the medium term.