• Like
Shree Ganesh(Update)
Upcoming SlideShare
Loading in...5
×

Shree Ganesh(Update)

  • 342 views
Uploaded on

 

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
342
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
4
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. LOHIA SECURITIES LTD. Shree Ganesh Jewellery House Limited Prakash Narayan Sharma prakash.sharma@lohiasecurities.com
  • 2. Shree Ganesh Jewellery House Ltd.(Update) LOHIA SECURITIES LTD. Company Background  Shree Ganesh Jewellery House Ltd. is one of 12th September 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.BO and hallmarked gold jewellery, gold Price (`) 149.05 enameled jewellery, gold jewellery studded Target Price (`) 260 with precious stones and Italian fusion Time (in Months) 12 jewellery Dividend Yield (%) 4.03%  The Company has manufacturing units 52 Week High/ Low(`) 286/117 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) 9,044 Avg. Vol.NSE(3M) 1,64,717 Investment Rationale Beta 0.91  Q1FY12 results in line with expectation. Strong order book provides visibility of INDEX future earning capacity.  Enhanced product portfolio to assist in Index Weightage (%) increasing the customer base and BSE Small Cap 0.277% maintaining topline in the present scenario of rising gold prices.  Company’s plan to add additional retail SHARE-HOLDING PATTERN (%) stores in India to improve topline and Promoters 70.66 bottomline. DIIs 4.15  Company’s backward integration plans to FIIs/NRIs/OCBs 11.83 improve margins in the long run. Corporate Bodies 8.95 General Public 4.41 Risks & Concerns As on 30/06/2011  Deterioration of macro conditions can adversely affect exports and discretionary RELATIVE PERFORMANCE (%) spending.  High concentration risk as revenues are Stock over Nifty Stock dependent on few major clients. Nifty  Volatility in gold prices can impact 1 Month -2.5% 2.5% 5% volumes. 3 Month -10% -44% -34%  Seasonal nature of the business. 12 Month -12% -13% -1%Financial 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)* 3.43 2.29 1.99P/BV (x)* 0.84 0.62 0.48ROE (%) 24.57% 27.33% 24.12%* P/E, P/BV computed taking CMP of `149.05 as on 12/09/2011. 2 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 3. Shree Ganesh Jewellery House Ltd.(Update) LOHIA SECURITIES LTD.Investment RationaleGrowth visibility: SGHL’s quarterly results were in line with our estimates. The company has addedabout `5,000 Mn of orders during the quarter and has an outstanding order book of `35,000 Mn, whichoffers visibility for the company’s future revenue generating capacity. If the company continues postinggood results in the ensuing quarters, it would help in attracting investors and thereby helping the shareprices to recover. As per our estimates, the company would clock revenue and PAT of Rs. 75,000 Mnand Rs. 3,957 Mn respectively in FY12.Good demand for Italian fusion jewellery: The Company had traditionally been into themanufacturing of plain jewellery products. Now the company has expanded its product portfolio toinclude machine made light weight, Italian fusion jewellery which is more affordable. Commercialproduction of Italian jewellery commenced in Q4FY11. The main brand in this segment is Gaja Lite. Theweight range for Gaja Lite jewellery varies between 1 to 20 gms with 18 to 22 Karat gold. With soaringgold prices, the Gaja Lite brand would help the company in attracting the low budget customers. TheItalian fusion jewellery has been well received by both domestic as well as overseas customers and hashelped the company in diversifying the customer base. This augurs well for the company.Expansion of retail presence in India: SGJHL plans to expand its retail footprint in India. Thecompany has added 3 retail stores during the quarter taking its total to 23 stores across India.Management is confident of meeting its target of adding 30 retail stores during the current financialyear through combination of owned stores, franchisee stores and shop-in-shop arrangements throughits strategic alliance with Bharti-Walmart. This would help the company in improving its topline as wellas bottomline.Backward Integration to assist in margin improvement: SGJHL is in the process of setting up a goldrefinery plant with an annual installed capacity of 35,000 kg at Domjur in West Bengal. It is expected tocommence trial production at the beginning of Q3FY12. The facility would refine pre-used gold, whichwould then be used as raw material for jewellery manufacture. Refining old gold in-house wouldeliminate cost factors such as commissions, import costs and duties and other incidental expenses andreduce the basic raw material input cost. The company intends to source old/ used gold fromgovernment agencies, the domestic and international markets as well as through its proposed retailnetwork. Currently, the company procures refined gold from suppliers such as Al-Marhaba TradingFZC, Bank of Nova Scotia, Standard Chartered Bank and the State Trading Corp of India. The Goldrefining plant would help in improving the operating margins by 1-1.5%.Recent DevelopmentShree Ganesh Jewellery House to foray into gold loan business: SGJHL, which is planning to forayinto the gold loan business, has recently acquired a Kolkata-based non-banking financial servicescompany (NBFC), at an undisclosed price. It is looking for the Reserve Bank of Indias approval forsetting up NBFC outfit. It had applied for an NBFC license to the RBI in February. The company hastaken the acquisition route to fast forward its entry in this segment. The acquired company has anexisting portfolio of gold loans. The NBFC would function as a subsidiary of SGJHL and would beoperational in the next three-to-four months. By this year-end the jewellery major plans to roll out 50finance outlets across the country through its NBFC arm. Loan against gold would be the primarybusiness of the company. 3 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 4. Shree Ganesh Jewellery House Ltd.(Update) LOHIA SECURITIES LTD.Results update (Standalone)…Particulars (` Million) Q1FY12 Q1FY11 YoY(%) Q4FY11 QoQ(%)Net Sales 23,867 12,284 94% 11,173 114%Other Operating Income 197 97 102% -98 302%Total Operational Income 24,063 12,382 94% 11,075 117%Total Expenditure 23,088 11,610 99% 10,308 124%EBITDA 975 772 26% 768 27%EBITDA Margin (%) 4.09% 6.28% 6.87%Depreciation 41 7 497% 32 28%EBIT 935 765 22% 736 27%EBIT Margin (%) 3.92% 6.23% 6.59%Other Income 2 12 -86% 7 -75%Interest & Financial Charges 248 127 95% 263 -6%PBT 688 650 6% 480 43%PBT Margin (%) 2.88% 5.29% 4.29%Provision for Taxation -4 13 -127% 4 -197%Profit After Tax (PAT) 692 637 9% 476 45%Net Profit Margin (%) 2.90% 5.19% 4.26%Although there were some concerns among the investors about SGJHL’s quarterly results and futureprospects, especially after some rumors about default by a major Dubai based client came in public, theresults posted by the company were in line with our estimates. It shows that the business operationsare running as usual at SGJHL and the concerns raised by investors were unwarranted. The majorhighlights of the result were:  Strong revenue growth of around 94% in Q1FY12 as compared to Q1FY11 is primarily an outcome of firm demand across product categories and markets and rising gold prices. The company is seeing strong demand for its newly launched light weight Italian fusion jewellery because of its relatively low cost and affordability.  EBITDA increased by 26% YoY to `975Mn mainly because of topline growth; EBITDA Margin declined to 4.09% from 6.28% in Q1FY11 as gold prices moved up during the quarter.  Depreciation and interest costs at `41 Mn and `248 Mn were up significantly by 497% YoY and 95% YoY.  Profit before Tax was up by 6% YoY at `688 Mn and Net profit at ` 692Mn was up by 9% YoY.  Retail contribution, during the quarter, stood at around 14.6% of the total domestic revenues as compared to 10.81% in Q1 FY2011 .  In Q1 FY2012, contribution of studded jewellery to the Company’s revenue mix increased to 25- 30% as compared to 15-20% in Q1 FY2011 . 4 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 5. Shree Ganesh Jewellery House Ltd.(Update) LOHIA SECURITIES LTD. Net Sales (Rs. Mn) PAT (Rs. Mn) 842 23,867 683 692 17,921 637 476 12,284 11,029 11,173 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 EPS (Rs./Share) Operating & Net Margins 10% 13.88 8% 11.25 11.4 6% 10.5 4% 7.85 2% 0% Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 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 5 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 6. Shree Ganesh Jewellery House Ltd.(Update) 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 6 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 7. Shree Ganesh Jewellery House Ltd.(Update) 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 7 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 8. Shree Ganesh Jewellery House Ltd.(Update) LOHIA SECURITIES LTD.Outlook & ValuationThe scrip is currently trading at ` 149. In the short term there can be some correction in the stock dueto overall negative sentiments in the market. The overall market is expected to remain range boundfrom nifty levels of 4800 to 5100. In such a situation, the stock can come down to `130 levels. But weare very bullish on this scrip from a long term perspective. We expect the scrip to reach `260 within aperiod of 1 year due to the following reasons:  It is among the fastest growing companies in India (Source: Business World Magazine). Even its Q1FY12 results were in similar lines.  The Gold refining plant which would be operational by the beginning of Q3FY12 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. The company is known to be a investor friendly company.At the current market price of `149, the stock is trading at P/E of 3.43 with industry P/E hoveringaround 9.60, the stock is underpriced. Based on discounted cash flow method, we have arrived at a fairprice target of `260 for SGJHL. At our target price, the stock offers a potential upside of around 75%from the current level; we initiate a ‘buy’ rating on the stock with accumulation at every dip. 8 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700
  • 9. Shree Ganesh Jewellery House Ltd.(Update) 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 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 Pooja Bajaj pooja.bajaj@lohiasecurities.com +9133 40026684 Rajkumar Mondal rajkumar.mondal@lohiasecurities.com +91 33 40026732 Sailesh Sarda sailesh.sarda@lohiasecurities.com +91 33 40026732 Sonu Shah sonu.shah@lohiasecurities.com +91 33 40026732 Vikash Agarwal vikash.agarwal@lohiasecurities.com +91 33 40026822 Our Technical Research Team Name E-Mail Id Contact No. Debraj Sarkar debraj.sarkarl@lohiasecurities.com +91 33 22820391Rajarashi Mukherjee Rajarashi.mukherjee@lohiasecurities.com +91 33 22820392 Our Derivative & Statistical Research Team Name E-Mail Id Contact No. Ayush Choudhary Ayush.choudhary@lohiasecurities.com +91 33 40026600Nisha Jhunjhunwala Nisha.jhunjhunwala@lohiasecurities.com +91 33 40026822 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. 9 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700