LOHIA SECURITIES LTD. Shree Ganesh Jewellery House           Limited            Prakash Narayan Sharma       prakash.sharm...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.Dear Patrons...The gems and je...
Shree Ganesh Jewellery House Ltd.                                   LOHIA SECURITIES LTD.                               Pa...
Shree Ganesh Jewellery House Ltd.                                        LOHIA SECURITIES LTD.   Company Background       ...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.Company Profile…Shree Ganesh J...
Shree Ganesh Jewellery House Ltd.                                       LOHIA SECURITIES LTD.Growth Path                  ...
Shree Ganesh Jewellery House Ltd.                                        LOHIA SECURITIES LTD.BrandsBrand          Brand D...
Shree Ganesh Jewellery House Ltd.                                        LOHIA SECURITIES LTD.Investment Rationale…Recover...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.Derisked business model: The p...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.to price its products competit...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.increase its market share by t...
Shree Ganesh Jewellery House Ltd.                                         LOHIA SECURITIES LTD.             Net Sales (Rs....
Shree Ganesh Jewellery House Ltd.                                         LOHIA SECURITIES LTD.Balance Sheet (Standalone)P...
Shree Ganesh Jewellery House Ltd.                                         LOHIA SECURITIES LTD.Cash Flow StatementParticul...
Shree Ganesh Jewellery House Ltd.                                        LOHIA SECURITIES LTD.Peer set Analysis           ...
Shree Ganesh Jewellery House Ltd.                                      LOHIA SECURITIES LTD.Outlook & ValuationShort-Term ...
Shree Ganesh Jewellery House Ltd.                                         LOHIA SECURITIES LTD.For Suggestions, clarificat...
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Shree Ganesh Jewellery House

  1. 1. LOHIA SECURITIES LTD. Shree Ganesh Jewellery House Limited Prakash Narayan Sharma prakash.sharma@lohiasecurities.com
  2. 2. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Dear Patrons...The gems and jewellery industry occupies an important position in the Indian economy. It is aleading foreign exchange earner, as well as one of the fastest growing industries in the country.India’s gem and jewellery industry comprises diamonds, coloured stones, gold, silver and pearls;of which the main products in terms of value and aesthetic appeal are gold and diamonds. Theindustry directly employs around 1.5 million skilled work-force. The Indian gems and jewelleryindustry is competitive in the world market due to its low cost of production and the availabilityof skilled labour.The gem and jewellery industry is largely unorganized, labour intensive and export oriented. It ischaracterized by large requirements for working capital and raw materials. The industry is alsocharacterized by gold price volatility. The unorganized sector mainly comprises family jewellers,which is nearly 96% of the market. The balance 4% market share belongs to the organized sectorcomprising multiple brands.Gems and jewellery industry is undergoing a transformation from family jeweller’s shops to retailformats such as boutiques, supermarkets and gold souks. The launch of several brands has driventhe launch of retail stores. Branded jewellery is a recent popular phenomenon in India, as most ofthe jewellery can be worn everyday as a fashion accessory. Branded jewellery is lightweight andreflects one’s lifestyle and personality, which has appealed to the growing Indian population.Branded jewellery has introduced value added services such as the certification of gold anddiamonds, lifetime return and buy-back schemes. Another factor which accelerated the growth ofbranded jewellery in India is that branded jewellery has been promoted by high-profile reputedcompanies, who guarantee the purity of gold through hallmarks and certifications. Earlierpurchasers of jewellery would have to rely on the purity of gold by virtue of relationship with thejeweller.The demand for gold and jewellery in India is perennial, which further increases during religiousfestivals and weddings. Favourable demographics like increased urbanisation, rising number ofmiddle class households & working population and increased disposable income are expected tofuel discretionary spending of Indian people. Moreover with increasing number of buyers acrossthe world turning to India as their preferred source for quality jewellery, the future of thisindustry looks promising. This augurs well for Shree Ganesh Jewellery House Limited which isamong the largest global players in handcrafted gold jewellery and renowned for its high qualityproducts. We are quite optimistic about this company’s future.Regards,Lohia Research 2 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  3. 3. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD. Particulars Page No. Company: Shree Ganesh Jewellery House Ltd. 4-16 Contents: --Company Profile 5-7 --Investment Rationale 8-10 --Risk & Concern 10-11 --Results Update 11-12 --Financial Highlights 12-14 --Outlook & Valuation 15-16 Company Office Branches 17 Research Team 17 Disclaimer 17 3 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  4. 4. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD. Company Background  Shree Ganesh Jewellery House Ltd. is one of 13th June 2011 the largest manufacturer and exporter of handcrafted gold Jewellery in India, exporting MARKET DATA primarily to countries such as U.A.E., Bloomberg Code SGJ:IN Singapore, and Hong Kong  The product portfolio includes handcrafted Reuters Code SHRG.NS and hallmarked gold jewellery, gold Price (`) 267 enameled jewellery, gold jewellery studded Target Price (`) 300 with precious stones and Italian fusion Time (in Months) 12 jewellery Dividend Yield (%) 2.25%  The Company has manufacturing units 52 Week High/ Low(`) 284/145 located in Mondalpara, Manikanchan SEZ at West Bengal, which is presently the only Equity Capital(` Mn) 606.83 jewellery SEZ in West Bengal and at Domjur Face Value (`) 10 (upcoming) Market Cap (` Mn) 16,187  Current order book size stands at `50,000 Avg. Vol.NSE(3M) 2,61,833 Million INDEX Investment Rationale Index Weightage (%)  Recovery in global economy to aid company’s performance BSE Small Cap 0.277%  Derisked business model  Plans of expansion in customer base SHARE-HOLDING PATTERN (%)  Plans of expansion of product portfolio  Expansion of retail presence in India Promoters 70.66  Backward Integration DIIs 4.66  Strategic location of manufacturing units and FIIs/NRIs/OCBs 12.81 strong skilled craftsmen base Corporate Bodies 5.14  Excellent design capabilities General Public 6.73  Granted the status of “Four Star Export As on 31/03/2011 house” & “Nominated agency”  Shift towards branded jewellery gaining RELATIVE PERFORMANCE (%) momentum Stock over Nifty Stock Key Risk to Investment Nifty  Overdependence on particular clients & 1 Month -1.1% -1.3% -0.2% geography 3 Month 1% 75% 74%  Fluctuations in gold prices 12 Month 7% 134% 127%  Continued dominance of unorganized playersFinancial Highlights FY11 FY12E FY13ERevenue (`Mn) 52,407 75,000 85,000Revenue growth (%) 78% 43% 13%EBDITA (`Mn) 3,393 5,981 6,841EBIT (`Mn) 3,333 5,785 6,606Net Profit (`Mn) 2,638 3,957 4,536EPS (`) 43.48 65.21 74.75EPS growth (%) 59% 50% 15%P/E (x)* 6.14 4.09 3.57P/BV (x)* 1.51 1.12 0.86ROE (%) 24.57% 27.33% 24.12% Company Profile…* P/E, P/BV computed taking CMP of `267 as on 13/06/2011. 4 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  5. 5. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Company Profile…Shree Ganesh Jewellery House Ltd. (SGJHL) is one of theleading manufacturer and exporter of hallmarked andhandcrafted gold jewellery from India. It has beenrecognized by the government of India as a 4 STAR exporthouse. SGJHL was promoted by two bothers Mr. NileshParekh and Mr. Umesh Parekh on 30 August 2002.On 1 April, 2003, the company took over the business of thepartnership firm Shree Ganesh Jewellers. A few years later,in April 2006, amalgamation of its 6 group companiesnamely Doyen Traders and Properties Pvt. Ltd., ShreeGajanand Jewellers Pvt. Ltd., Pitty Fincon Service Pvt. Ltd., Pancharatna Jewellers Pvt. Ltd., JankiProperties Pvt. Ltd. and Creative Jewels (India) Pvt. Ltd took place. On 9 April 2010, the company gotlisted on BSE as well as NSE. The company is headquartered in Kolkata and has its subsidiary offices inHyderabad, Chennai, Bangalore and Delhi. Mr. Nilesh Parekh is the Chairman and Mr. Umesh Parekh isthe Managing Director of the company. The company is into manufacturing and exports of gold jewellery, diamond jewellery, gemstone studded jewellery and light weight Italian jewellery. The product range includes rings, earrings, pendants, bracelets, necklaces, bangles and medallions. The company has four manufacturing units located in Manikanchan, Kolkata – a Gems & Jewellery dedicated SEZ promoted by West Bengal Government. The company manufactures product of varied price range to cater to allcustomers across high-end, midmarket and value market segments. The company has a team ofcreative and award winning designers including celebrity designer Mr. Sabyasachi Mukherjee who helpin managing a large and diverse portfolio of designs. The products manufactured by SGJHL are soldthrough its retail branded stores “Gaja”. Gaja jewellery typifies Bengal craftsmanship which has beenacclaimed across the globe for its intricate and minute detailing work like ‘filigree’ and ‘polki’The company derives around 88% revenue from exports with major export markets being UAE,Singapore and Hong Kong and the remainder comes from its domestic operations.In March 2010, company had come out with an Initial Public Offering (IPO) of 142.7 lakh equity sharesof Rs 10 each with a price band of ` 260 – 270 per share for funding its expansion in domestic as well asexport operations. The company had raised cash of ` 3.16 Bn through this issue.Credit RatingNSIC – CRISIL (SE 1A+): which indicates "Highest performance Capability and High Financial Strength".CARE RATINGS (PR1+): which indicates “Strong Capacity for timely payments of short term debtobligations and carry lowest credit risk”.CARE RATINGS (A+): which indicates “Adequate capacity for timely payments of its long term debtsand carry low credit risk”. 5 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  6. 6. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Growth Path •Promoters engaged in family business of gold 1992-2002 jewellery manufacturing 2002 •Year of Incorporation •Took over partnership firm "Shree Ganesh 2003 Jewellers" engaged in jewellery business 2004 •Set up manufacturing unit at Manikanchan SEZ •Promoters awarded "Young Achievers Award" 2006 by SinGems •Opened first branded retail jewellery store 2007 •Amalgamation of 6 Group companies •PE investment by Credit Suisse 2008 •"Outstanding Export Performance" award by GJEPC •"Outstanding Export Performance" award by GJEPC •Turnover of Rs. 2000 Cr. 2009 •Received "Four Star Export House" status •"Outstanding Export Performance" award by 2010 GJEPC •IPO of Rs. 3,150 MnSubsidiariesCompany Name % of HoldingGokul Jewellery House Pvt. Ltd. 51.45%Easy Fit Jewellery Pvt. Ltd. 100%Shree Ganesh Jewellery House (Singapore) Pte Ltd. 100%Sumit Jewels Pvt. Ltd. 100%Gaja Finance Pvt. Ltd. 100%Shree Ganesh Jewellery House FZE 100% 6 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  7. 7. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.BrandsBrand Brand Definition Product Profile Weight Range Design ProfileNameGaja Gold Designer jewellery for Plain gold jewellery 25gm – 65gm Traditional, all occasions Thematic, ContemporaryGold Designer Bridal gold 22K Plain & studded 65gm – 125gm TraditionalBridals jewellery gold jewelleryGold 22K Gold accessories Plain Gold (Casting 25gm – 60gm Trendy, Modern,Elements for men jewellery) FusionMari Gold 22K Gold light weight Plain Gold (Casting 01gm – 25gm Trendy, Modern, jewellery jewellery) FusionSitaare 22K Gold Jewellery for Plain Gold Jewellery 01gm – 15gm Trendy, Modern, kids FusionYou 18K Diamond Heart Diamond Jewellery 005cts – 0150cts Trendy, Modern, collection (Casting jewellery) 25gm – 45gm FusionDistar Diamond & 18K/14K Diamond Jewellery 005cts – 35cts Trendy, Modern, Gold studded jewellery (Casting jewellery) 25gm – 45gm FusionGM Gold 1gm Gold jewellery Gold plated 005cts – 35cts Trendy & Fusion jewellery 25gm – 45gmManagementName DesignationMr. Nilesh Parekh Executive ChairmanMr. Umesh Parekh Managing DirectorMr. Sharad Mohata Non-Executive DirectorMr. Satish Chandra Chaturvedi Independent DirectorMr. Pawan Singh Ingty Independent DirectorMr. Dwarka Prasad Mathur Independent DirectorMajor ShareholdersShareholder % of OutstandingCredit Suisse PE Asia Investments (Mauritius) Ltd 5.27%Macquarie Bank Limited 4.49%IFCI Limited 2.30% 7 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  8. 8. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Investment Rationale…Recovery in global economy to aid company’s performance: SGJHL is an export dependentcompany. The company derives around 88% revenue from exports and the remainder comes from itsdomestic operations. So the continuous recovery in global economy augurs well for the company. Thecompany had managed to perform well even during the global recession in FY08 and FY09, mainlybecause of its customer base being concentrated in emerging economies like UAE and South East Asiawhich were least affected during slowdown. However, with the company’s recent thrust on expandingits customer base in the European, Australian, African & untapped Middle Eastern markets, the healthof global economy becomes utmost important. As per the International Monetary Fund (IMF) estimates,the global economy will grow at a healthy pace of 4.4% in 2011. Emerging economies like Middle Eastand South East Asia are also expected to grow at a healthy pace which augurs well for the company asits exports are mainly concentrated in these economies. World GDP growth estimates (%)Particulars 2009 2010 2011E 2012EWorld GDP -0.5 5.0 4.4 4.5Advanced Economies -3.4 3.0 2.4 2.6United States -2.6 2.8 2.8 2.9Euro Area -4.1 1.7 1.6 1.8Japan -6.3 3.9 1.4 2.1United Kingdom -4.9 1.3 1.7 2.3Canada -2.5 3.1 2.8 2.6Emerging & Developing Economies 2.7 7.3 6.5 6.5Russia -7.8 4.0 4.8 4.5China 9.2 10.3 9.6 9.5India 6.8 8.4 8.2 7.8ASEAN 1.7 6.9 5.4 5.7Brazil -0.6 7.5 4.5 4.1Middle East & North Africa 1.8 3.8 4.1 4.2Source: IMF (World Economic Outlook, April 2011) 8 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  9. 9. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Derisked business model: The price fluctuation of gold which comprises more than 90% of rawmaterial cost does not affect the margins of the company as gold is a pass-through commodity for theCompany. The price at which the customer fixes the gold content of the jewellery determines thepurchase price with the vendor.Expansion of customer base: The company derives around 88% revenue from exports with majorexport markets being UAE, Singapore and Hong Kong. The company plans to diversify its customer baseby entering new geographies and expanding its product portfolio The company intends to diversify itscustomer base in the European, Australian, African and untapped Middle-Eastern markets, apart fromincreasing its present customer base. This strategy is likely to bode well for the company, de-risking itsmodel from over dependence on a few countries. SGJHL has incorporated a subsidiary in Singapore andintends to incorporate another subsidiary at Dubai for easy procurement of gold and catering to theMiddle East and African market. SGJHL proposes to distribute its branded products abroad throughthese subsidiaries.Expansion of Product Portfolio: The company had traditionally been into the manufacturing of plainjewellery products. Now the company has expanded its product portfolio to include machine madelight, Italian fusion jewellery which is more affordable. Commercial production of Italian jewellerycommenced in Q4FY11. The plant has an installed capacity to convert 10 tonnes of gold. Addition ofItalian fusion jewellery to the product portfolio would enable the company to reduce its dependence ona single product and also tap new markets, thereby resulting in higher revenues and profitability. Thecompany is also increasing the proportion of high margin studded jewellery in its total revenue mix.The proportion of studded jewellery to the Company’s revenue mix increased to 25% in FY2011 ascompared to 15% in FY2010.Expansion of retail presence in India: SGJHL plans to expand its retail footprint in India. Theexpansion in retail base would be from the present 20 retail outlets to almost 50 by FY 2012. The fundsfor the expansion will be met through internal accruals and debt. The company also proposes to sell itsproducts to retail chains or distributors, on a franchisee model, who in turn will sell it to the endcustomers. SGJHL has entered into strategic alliances with Vishal Retail Limited for "Shop-in-Shop"arrangement through their existing outlets nationwide. The company is also exploring retailopportunities in overseas market. Retail sales accounted for 12% of revenue in FY11.Backward Integration: SGJHL is in the process of setting up a gold refinery plant with an annualinstalled capacity of 35,000 kg at Domjur in West Bengal. It is expected to commence trial production atthe beginning of Q2FY12. The facility would refine pre-used gold, which would then be used as rawmaterial for jewellery manufacture. Refining old gold in-house would eliminate cost factors such ascommissions, import costs and duties and other incidental expenses and reduce the basic raw materialinput cost. The company intends to source old/ used gold from government agencies, the domestic andinternational markets as well as through its proposed retail network. Currently, the company procuresrefined gold from suppliers such as Al-Marhaba Trading FZC, Bank of Nova Scotia, Standard CharteredBank and the State Trading Corp of India.Strategic location of manufacturing units and strong skilled craftsmen base: SGJHL’smanufacturing units are located at Manikanchan SEZ, which entitles it to direct and indirect taxationbenefits and expeditious custom clearances. Manikanchan SEZ’s close proximity to the internationalairport enables the easy transit of consignments. These benefits reduce costs and consequently allow it 9 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  10. 10. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.to price its products competitively. Other than this, the manufacturing units are located at West Bengalwhich is known for the availability of karigars skilled in the manufacture of handcrafted jewellery.Availability of skilled craftsmen at lesser costs with vast traditional knowledge and expertise injewellery making is a key competitive strength that has established the Company’s presence in thesegment. This allows it to price its products at competitive prices and maintain superior net marginsclose to 5% compared to 2% for the Industry peer.Excellent design capabilities: SGJHL has dedicated design teams comprising award winningdesigners. Sabyasachi Mukherjee is one of its leading designers. The design teams are responsible forgauging market trends and conceptualization of new designs. Designers continually attend exhibitions,seminars, jewellery shows, subscribe to various design magazines / journals to understand the pulse ofthe market in India and globally. They also collate feedback from distributors / retailers and company’ssales team to understand consumer needs. The company develops an average of 600 designs a month.SGJHL’s design team constantly strives to cater to diverse consumer needs by incorporating real timefeedback on the markets into their designs. SGJHL caters to all customers across high-end, mid-market,and value market segments. SGJHLs product profile encompasses traditional, thematic, contemporary,trendy, modern and fusion designs.Granted the status of “Four Star Export House” & “Nominated Agency”: SGJHL received the ‘FourStar Export House’ certificate from the Joint Director of Foreign Trade, Government of India in June2009 and has been bestowed upon with the status of ‘Nominated Agency’ under the Foreign TradePolicy, which allows the Company to directly import precious metals. As a nominated agent, theCompany shall be able to import gold directly for its manufacturing purposes and thereby eliminate thecosts incurred on intermediaries.Shift towards branded jewellery gaining momentum: The domestic jewellery market at present isdominated by neighbourhood jewellers, which constitute 94% of the total market while the brandedsegment constitutes the rest. However with improved awareness among consumers, primarily youngand educated people in the metros and Tier 1 cities, more people are showing preference for brandedjewellery due to the benchmarking of quality by jewellery retailers and availability of jewellery withcontemporary designs. Organised retailers also provide higher transparency and better after-salesservicesRisk and concernRevenue Concentration: Around 50% of the Company’s exports are made to the Middle East, which isone of the largest global hubs for gold jewellery sales. Also its revenue is dependent on a few majorclients. We believe that such overdependence on a particular client and geography raises the riskprofile significantly as the breakdown of business relations with any client or any political or economicinstability in its export destination would adversely affect its profitability and margins.Gold price fluctuations: Jewellery demand is highly dependent on the movement in gold prices withstable/falling prices leading to an improvement in jewellery demand and vice versa. The significantjump in gold prices can lead to a significant fall in gold jewellery volume thereby impacting margins.Continued dominance of unorganized players: The jewellery market in India is dominated byunorganised players with over 90% of the market share. In the recent past, SGJHL has been able to 10 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  11. 11. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.increase its market share by targeting young and educated customers in metros and Tier I cities withthe guarantee on purity of gold and presenting contemporary designs. However, the company’sincremental growth is dependent on its ability to attract a large consumer base in Tier II and Tier IIIcities who still rely on family jewellers.Results update (Standalone)…Particulars (`Million) Q4FY11 Q4FY10 YoY(%) FY11 FY10 YoY (%)Net Sales 11,173 8,691 29% 52,407 29,499 78%Other Operating Income (98) 18 (655)% 136 52 162%Total Operational Income 11,075 8,708 27% 52,543 29,551 78%Raw Material Consumed 8,741 7,540 16% 37,505 26,177 43%Purchase of Traded Goods 1,428 415 244% 11,166 822 1258%Employee Cost 61 32 89% 247 163 52%Other Expenditure 79 91 (14)% 232 347 (33)%EBITDA 768 630 22% 3,393 2,042 66%EBITDA Margin (%) 6.87% 7.25% 6.47% 6.92%Depreciation 32 7 329% 60 23 158%EBIT 736 623 18% 3,333 2,019 65%EBIT Margin (%) 6.59% 7.16% 6.36% 6.84%Other Income 7 3 167% 37 4 817%Interest & Financial Charges 263 106 148% 709 313 127%PBT 480 519 (8)% 2,661 1,710 56%PBT Margin (%) 4.29% 5.97% 5.08% 5.80%Provision for Taxation 4 20 (82)% 22 51 (57)%Profit After Tax (PAT) 476 499 (5)% 2,638 1,659 59%Net Profit Margin (%) 4.26% 5.75% 5.03% 5.62%  Strong revenue growth of around 78% in FY2011 as compared to FY2010 is primarily an outcome of firm demand across product categories and markets and rising gold prices.  The proportion of studded jewellery to the Company’s revenue mix increased to 25% in FY2011 as compared to 15% in FY2010 which helped the company to maintain its net profit margins around 5% despite rise in raw material cost, depreciation and interest cost.  Addition of Italian fusion jewellery to the product portfolio is expected to further enhance revenues as the Company caters to a diverse customer base.  EBITDA Margin declined to 6.47% in FY11 from 6.92% in FY10 mainly due to increase in raw material prices and employee cost.  Depreciation cost increased by 158% in FY11 mainly due to widening of the fixed assets base as a result of capacity enhancement and retail expansion undertaken by the company during the year.  The company’s interest cost during FY11 increased by 127% to `709 Mn against `313 Mn in FY10 on the back of higher debt raised by the company and due to increase in cost of funds.  Incidence of tax remained negligible given the exports benefits arising out of operations in government notified SEZs. With a change in regulation related to levy of MAT on SEZs, tax incidence is expected to increase. 11 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  12. 12. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD. Net Sales (Rs. Mn) PAT (Rs. Mn) 17,921 842 683 12,284 637 11,029 11,173 499 476 8,691 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 EPS (Rs./Share) Operating & Net Margins 13.88 10% 8% 11.25 6% 10.50 8.23 4% 7.85 2% 0% Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 OPM NPM Financial HighlightsIncome Statement (Standalone)Particulars (` Mn) FY10 FY11 FY12E FY13ENet sales 29,499 52,407 75,000 85,000Other Operating Income 52 136 163 202Total Operational Income 29,551 52,543 75,163 85,202Raw Material Consumed 26,999 48,671 68,498 77,605Employee Cost 163 247 384 417Other Expenditure 347 232 300 340EBITDA 2,042 3,393 5,981 6,841Depreciation 23 60 196 234EBIT 2,019 3,333 5,785 6,606Other Income 4 37 31 47Interest & Financial Charges 313 709 990 1,122Profit Before Tax 1,710 2,661 4,826 5,532Provision for Taxation 51 22 869 996Profit after Tax 1,659 2,638 3,957 4,536EPS (`) 27.34 43.48 65.21 74.75*Lohia research estimates 12 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  13. 13. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Balance Sheet (Standalone)Particulars (` Mn) FY10 FY11 FY12E FY13E AssetsNet Fixed Asset 174 1,194 2,440 3,317Investments 54 1,380 118 130Current Assets 14,922 21,760 27,564 33,775Total Assets 15,151 24,335 30,122 37,223 LiabilitiesEquity Share Capital 485 607 607 607Reserves & Surplus 4,881 10,131 13,875 18,198Secured Loans 2,890 4,635 4,860 5,692Unsecured Loans 600 1,100 1,080 1,308Current Liabilities & Provisions 6,370 7,944 9,782 11,500Deferred Tax Liabilities (76) (82) (82) (82)Total Liabilities 15,151 24,335 30,122 37,223*Lohia research estimatesFinancial Ratios FY10 FY11 FY12E FY13EProfitability RatiosReturn on Assets (ROA) 10.95% 10.84% 13.14% 12.19%Return on Equity (ROE) 30.91% 24.57% 27.33% 24.12%Return on Capital Employed (ROCE) 22.80% 20.24% 28.33% 25.60%DuPont Analysis - ROE Decomposition (x)PAT/PBT (Tax Efficiency) 0.97 0.99 0.82 0.82PBT/EBIT (Interest Burden) 0.85 0.80 0.83 0.84EBIT/Sales (Operating Profit Margin) 0.07 0.06 0.08 0.08Sales/Total Assets (Asset Turnover) 1.95 2.15 2.49 2.28TA/NW (Financial Leverage) 2.82 2.27 2.08 1.98Return on Equity (ROE) (%) 30.91 24.57 27.33 24.12Liquidity RatiosCurrent Ratio 2.34 2.74 2.82 2.94Acid Test Ratio 2.04 2.31 2.32 2.45Debt-Equity Ratio 0.65 0.53 0.41 0.37Margin RatiosEBITDA Margin 6.92% 6.47% 7.97% 8.05%EBIT Margin 6.84% 6.36% 7.71% 7.77%PBT Margin 5.80% 5.08% 6.43% 6.51%Net Profit Margin 5.62% 5.03% 5.28% 5.34%*Lohia research estimates 13 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  14. 14. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Cash Flow StatementParticulars (` Mn) FY11 FY12E FY13E Cash Flow from Operating ActivitiesPAT 2,638 3,957 4,536Add: Depreciation 60 196 234Operating Profit before WC changes 2,698 4,154 4,770Changes in Current Assets (excluding cash) (6,993) (5,672) (3,039)Changes in Current Liabilities 1,568 1,838 1,718Changes in WC (5,424) (3,834) (1,321)Net Cash flow from Operations (2,726) 320 3,449 Cash Flow from Investment ActivitiesCapital Expenditure (CAPEX) (1,080) (1,442) (1,112)Increase in Investments (1,326) 1,262 (12)Net Cash flow from Investment Activities (2,406) (180) (1,124) Cash Flow from Financing ActivitiesChange in Equity 121 0 0Change in Debt 2,245 205 1,060Dividends Paid (426) (213) (213)Others 3,037 (0) (0)Net Cashflow from Financing Activities 4,977 (8) 847Net Increase in Cash & Cash Equivalents (155) 132 3,172Cash & cash equivalents at the beginning 6,586 6,431 6,563Cash & cash equivalents at the end 6,431 6,563 9,735*Lohia research estimates 14 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  15. 15. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Peer set Analysis Titan Rajesh Gitanjali ShreeParticulars Industries Exports Gems GaneshCurrent Share Price (`) 4,715 96 293 267No. of Shares (Mn) 44.39 295.26 84.87 60.68Face Value (`) 10 1 10 10Market Cap (`Mn) 209,281 28,419 24,884 16,187Sales (`Mn) 65,209 208,437 51,225 52,407PAT (` Mn) 4,304 2,480 2,246 2,638EPS (`) 96.96 8.40 26.46 43.48P/E (x)* 48.62 11.46 11.08 6.14P/BV 17.63 2.06 1.12 1.51Dividend Yield (%) 0.33% 1.03% 0.67% 2.25%Source: Moneycontrol.com, Lohia Research; P/E Comparison 10.32 6.14 SGJHL Industry P/E Source: Moneycontrol.com, Lohia ResearchComparison with Index 180 160 140 120 100 80 60 40 20 0 Source: NSE SGJHL S&P CNX Nifty 15 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  16. 16. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.Outlook & ValuationShort-Term View: The scrip is currently trading at ` 267. In the short-term i.e. next 1 to 2 months, weexpect the scrip to correct due to the following reasons:  The overall market is expected to remain range bound from nifty levels of 5300 to 5600.  In such a downward biased market, SGJHL has rallied by above 70% in a span of 3 months. To keep this momentum running would be difficult in the short run.It is normal for investors to book profits at this level. We expect the scrip to come down to ` 240 levelswhere it should consolidate before the next move will happen which is only after the results are out forthe quarter ended June 2011.Long-Term View: We are very bullish on this scrip from a long term perspective. We expect the scripto reach ` 300 within a period of 1 year due to the following reasons:  It is among the fastest growing companies in India (Source: Business World Magazine).  The Gold refining plant which would be operational by the beginning of Q2FY12 would improve operating margins by 1-1.5%.  The company plans to add 30 additional retail stores which would add to topline & bottomline.  Reserves are expected to reach `13875 Mn by the end of FY12. Then it would be a strong candidate for bonus & stock split.  Company’s interim dividend shows that the company is investor friendly.  Foreign investors are accumulating the shares. They have increased their stake to 12.66% in Q4FY11 from 10.88% in Q3FY11 and 7.11% in Q2FY11.At the current market price of `267, the stock is trading at P/E of 6.14 with industry P/E hoveringaround 10.32, the stock is underpriced. Based on discounted cash flow method, we have arrived at afair price target of `300 for SGJHL. At our target price, the stock offers a potential upside of around 12%from the current level; we initiate a ‘buy’ rating on the stock with accumulation at every dip. 16 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  17. 17. Shree Ganesh Jewellery House Ltd. LOHIA SECURITIES LTD.For Suggestions, clarifications & your valuable feedback write back to us at:Lohia Securities Ltd, 4 Brabourne Road, 5th Floor Kolkata-700001 Board :( 91-33) 40026600,E-mail: research@lohiasecurities.comFor Institutional SalesLohia Securities Ltd, 1602-B, Lady rattan Tower, 72 Dainik Shivner Marg Gandhinagar, worli,Mumbai- 400018 Board: (91-22) 2492 4449, E-mail: inst.dealing@lohiasecurities.comInstitutional Team: Our Fundamental Research Team Name E-Mail Id Contact No. Basanti Gourisaria basanti.gourisaria@lohiasecurities.com +91 33 40026822 Rajkumar Mondal rajkumar.mondal@lohiasecurities.com +91 33 40026734 Gitika Bhansali gitika.bhansali@lohiasecurities.com +91 33 40026821 Krishna K Agarwal krishna.agarwal@lohiasecurities.com +91 33 40026631 Prakash N Sharma prakash.sharma@lohiasecurities.com +91 33 40026732 Prabir Adhikary prabir.adhikary@lohiasecurities.com +91 33 40026734 Sonu Shah sonu.shah@lohiasecurities.com +91 33 40026732 Sailesh Sarda sailesh.sarda@lohiasecurities.com +91 33 40026732 Our Technical Research Team Name E-Mail Id Contact No. Aditya Agarwal aditya.agarwal@lohiasecurities.com +91 33 40026783 Our Derivative & Statistical Research Team Name E-Mail Id Contact No. Anand Lath anand.lath@lohiasecurities.com +91 33 40026685 Institutional Sales Name E-Mail Id Contact No. Ashok Kamat ashok.kamat@lohiasecurities.Com +91 22 24901310 Deepak Parekh deepak.parekh@lohiasecurities.Com +91 33 40026737Investment RatingBuy > 15 % Hold (5%-15%) Sell < 5% DISCLAIMER: The information and opinions contained herein have been compiled or arrived at, based upon information obtained from reliable sources. Such information has not been independently verified and no guarantee, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. LSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report. LSL and its directors, associates, employees may or may not have any positions in any of the stocks dealt in the report. This report is only for PRIVATE CIRCULATION. 17 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700

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