Shree Ganesh Jewellery House

LOHIA SECURITIES LTD.

Shree Ganesh Jewellery House
Limited

Prakash Narayan Sharma
prakash.sharma@lohiasecurities.com

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 a
leading 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. The
industry directly employs around 1.5 million skilled work-force. The Indian gems and jewellery
industry is competitive in the world market due to its low cost of production and the availability
of skilled labour.

The gem and jewellery industry is largely unorganized, labour intensive and export oriented. It is
characterized by large requirements for working capital and raw materials. The industry is also
characterized 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 sector
comprising multiple brands.

Gems and jewellery industry is undergoing a transformation from family jeweller’s shops to retail
formats such as boutiques, supermarkets and gold souks. The launch of several brands has driven
the launch of retail stores. Branded jewellery is a recent popular phenomenon in India, as most of
the jewellery can be worn everyday as a fashion accessory. Branded jewellery is lightweight and
reflects 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 and
diamonds, lifetime return and buy-back schemes. Another factor which accelerated the growth of
branded jewellery in India is that branded jewellery has been promoted by high-profile reputed
companies, who guarantee the purity of gold through hallmarks and certifications. Earlier
purchasers of jewellery would have to rely on the purity of gold by virtue of relationship with the
jeweller.

The demand for gold and jewellery in India is perennial, which further increases during religious
festivals and weddings. Favourable demographics like increased urbanisation, rising number of
middle class households & working population and increased disposable income are expected to
fuel discretionary spending of Indian people. Moreover with increasing number of buyers across
the world turning to India as their preferred source for quality jewellery, the future of this
industry looks promising. This augurs well for Shree Ganesh Jewellery House Limited which is
among the largest global players in handcrafted gold jewellery and renowned for its high quality
products. 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


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


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 players

Financial Highlights FY11 FY12E FY13E
Revenue (`Mn) 52,407 75,000 85,000
Revenue growth (%) 78% 43% 13%
EBDITA (`Mn) 3,393 5,981 6,841
EBIT (`Mn) 3,333 5,785 6,606
Net Profit (`Mn) 2,638 3,957 4,536
EPS (`) 43.48 65.21 74.75
EPS growth (%) 59% 50% 15%
P/E (x)* 6.14 4.09 3.57
P/BV (x)* 1.51 1.12 0.86
ROE (%) 24.57% 27.33% 24.12%
Company Profile…
* P/E, P/BV computed taking CMP of `267 as on 13/06/2011.



Company Profile…
Shree Ganesh Jewellery House Ltd. (SGJHL) is one of the
leading manufacturer and exporter of hallmarked and
handcrafted gold jewellery from India. It has been
recognized by the government of India as a 4 STAR export
house. SGJHL was promoted by two bothers Mr. Nilesh
Parekh and Mr. Umesh Parekh on 30 August 2002.

On 1 April, 2003, the company took over the business of the
partnership firm Shree Ganesh Jewellers. A few years later,
in April 2006, amalgamation of its 6 group companies
namely Doyen Traders and Properties Pvt. Ltd., Shree
Gajanand Jewellers Pvt. Ltd., Pitty Fincon Service Pvt. Ltd., Pancharatna Jewellers Pvt. Ltd., Janki
Properties Pvt. Ltd. and Creative Jewels (India) Pvt. Ltd took place. On 9 April 2010, the company got
listed on BSE as well as NSE. The company is headquartered in Kolkata and has its subsidiary offices in
Hyderabad, Chennai, Bangalore and Delhi. Mr. Nilesh Parekh is the Chairman and Mr. Umesh Parekh is
the 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 all
customers across high-end, midmarket and value market segments. The company has a team of
creative and award winning designers including celebrity designer Mr. Sabyasachi Mukherjee who help
in managing a large and diverse portfolio of designs. The products manufactured by SGJHL are sold
through its retail branded stores “Gaja”. Gaja jewellery typifies Bengal craftsmanship which has been
acclaimed 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 shares
of Rs 10 each with a price band of ` 260 – 270 per share for funding its expansion in domestic as well as
export operations. The company had raised cash of ` 3.16 Bn through this issue.

Credit Rating
NSIC – 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 debt
obligations and carry lowest credit risk”.

CARE RATINGS (A+): which indicates “Adequate capacity for timely payments of its long term debts
and carry low credit risk”.



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 Mn

Subsidiaries
Company Name % of Holding
Gokul 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%



Brands

Brand Brand Definition Product Profile Weight Range Design Profile
Name
Gaja Gold Designer jewellery for Plain gold jewellery 25gm – 65gm Traditional,
all occasions Thematic,
Contemporary
Gold Designer Bridal gold 22K Plain & studded 65gm – 125gm Traditional
Bridals jewellery gold jewellery
Gold 22K Gold accessories Plain Gold (Casting 25gm – 60gm Trendy, Modern,
Elements for men jewellery) Fusion
Mari Gold 22K Gold light weight Plain Gold (Casting 01gm – 25gm Trendy, Modern,
jewellery jewellery) Fusion
Sitaare 22K Gold Jewellery for Plain Gold Jewellery 01gm – 15gm Trendy, Modern,
kids Fusion
You 18K Diamond Heart Diamond Jewellery 005cts – 0150cts Trendy, Modern,
collection (Casting jewellery) 25gm – 45gm Fusion
Distar Diamond & 18K/14K Diamond Jewellery 005cts – 35cts Trendy, Modern,
Gold studded jewellery (Casting jewellery) 25gm – 45gm Fusion
GM Gold 1gm Gold jewellery Gold plated 005cts – 35cts Trendy & Fusion
jewellery 25gm – 45gm

Management

Name Designation
Mr. Nilesh Parekh Executive Chairman
Mr. Umesh Parekh Managing Director
Mr. Sharad Mohata Non-Executive Director
Mr. Satish Chandra Chaturvedi Independent Director
Mr. Pawan Singh Ingty Independent Director
Mr. Dwarka Prasad Mathur Independent Director

Major Shareholders
Shareholder % of Outstanding

Credit Suisse PE Asia Investments (Mauritius) Ltd 5.27%

Macquarie Bank Limited 4.49%

IFCI Limited 2.30%



Investment Rationale…
Recovery in global economy to aid company’s performance: SGJHL is an export dependent
company. The company derives around 88% revenue from exports and the remainder comes from its
domestic operations. So the continuous recovery in global economy augurs well for the company. The
company had managed to perform well even during the global recession in FY08 and FY09, mainly
because of its customer base being concentrated in emerging economies like UAE and South East Asia
which were least affected during slowdown. However, with the company’s recent thrust on expanding
its customer base in the European, Australian, African & untapped Middle Eastern markets, the health
of 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 East
and South East Asia are also expected to grow at a healthy pace which augurs well for the company as
its exports are mainly concentrated in these economies.

World GDP growth estimates (%)

Particulars 2009 2010 2011E 2012E

World GDP -0.5 5.0 4.4 4.5

Advanced Economies -3.4 3.0 2.4 2.6

United States -2.6 2.8 2.8 2.9

Euro Area -4.1 1.7 1.6 1.8

Japan -6.3 3.9 1.4 2.1

United Kingdom -4.9 1.3 1.7 2.3

Canada -2.5 3.1 2.8 2.6

Emerging & Developing Economies 2.7 7.3 6.5 6.5

Russia -7.8 4.0 4.8 4.5

China 9.2 10.3 9.6 9.5

India 6.8 8.4 8.2 7.8

ASEAN 1.7 6.9 5.4 5.7

Brazil -0.6 7.5 4.5 4.1

Middle East & North Africa 1.8 3.8 4.1 4.2

Source: IMF (World Economic Outlook, April 2011)



Derisked business model: The price fluctuation of gold which comprises more than 90% of raw
material cost does not affect the margins of the company as gold is a pass-through commodity for the
Company. The price at which the customer fixes the gold content of the jewellery determines the
purchase price with the vendor.

Expansion of customer base: The company derives around 88% revenue from exports with major
export markets being UAE, Singapore and Hong Kong. The company plans to diversify its customer base
by entering new geographies and expanding its product portfolio The company intends to diversify its
customer base in the European, Australian, African and untapped Middle-Eastern markets, apart from
increasing its present customer base. This strategy is likely to bode well for the company, de-risking its
model from over dependence on a few countries. SGJHL has incorporated a subsidiary in Singapore and
intends to incorporate another subsidiary at Dubai for easy procurement of gold and catering to the
Middle East and African market. SGJHL proposes to distribute its branded products abroad through
these subsidiaries.

Expansion of Product Portfolio: The company had traditionally been into the manufacturing of plain
jewellery products. Now the company has expanded its product portfolio to include machine made
light, Italian fusion jewellery which is more affordable. Commercial production of Italian jewellery
commenced in Q4FY11. The plant has an installed capacity to convert 10 tonnes of gold. Addition of
Italian fusion jewellery to the product portfolio would enable the company to reduce its dependence on
a single product and also tap new markets, thereby resulting in higher revenues and profitability. The
company 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 as
compared to 15% in FY2010.

Expansion of retail presence in India: SGJHL plans to expand its retail footprint in India. The
expansion in retail base would be from the present 20 retail outlets to almost 50 by FY 2012. The funds
for the expansion will be met through internal accruals and debt. The company also proposes to sell its
products to retail chains or distributors, on a franchisee model, who in turn will sell it to the end
customers. 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 retail
opportunities 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 annual
installed capacity of 35,000 kg at Domjur in West Bengal. It is expected to commence trial production at
the beginning of Q2FY12. The facility would refine pre-used gold, which would then be used as raw
material for jewellery manufacture. Refining old gold in-house would eliminate cost factors such as
commissions, import costs and duties and other incidental expenses and reduce the basic raw material
input cost. The company intends to source old/ used gold from government agencies, the domestic and
international markets as well as through its proposed retail network. Currently, the company procures
refined gold from suppliers such as Al-Marhaba Trading FZC, Bank of Nova Scotia, Standard Chartered
Bank and the State Trading Corp of India.

Strategic location of manufacturing units and strong skilled craftsmen base: SGJHL’s
manufacturing units are located at Manikanchan SEZ, which entitles it to direct and indirect taxation
benefits and expeditious custom clearances. Manikanchan SEZ’s close proximity to the international
airport enables the easy transit of consignments. These benefits reduce costs and consequently allow it



to price its products competitively. Other than this, the manufacturing units are located at West Bengal
which 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 in
jewellery making is a key competitive strength that has established the Company’s presence in the
segment. This allows it to price its products at competitive prices and maintain superior net margins
close to 5% compared to 2% for the Industry peer.

Excellent design capabilities: SGJHL has dedicated design teams comprising award winning
designers. Sabyasachi Mukherjee is one of its leading designers. The design teams are responsible for
gauging market trends and conceptualization of new designs. Designers continually attend exhibitions,
seminars, jewellery shows, subscribe to various design magazines / journals to understand the pulse of
the market in India and globally. They also collate feedback from distributors / retailers and company’s
sales 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 time
feedback on the markets into their designs. SGJHL caters to all customers across high-end, mid-market,
and value market segments. SGJHL's product profile encompasses traditional, thematic, contemporary,
trendy, modern and fusion designs.

Granted the status of “Four Star Export House” & “Nominated Agency”: SGJHL received the ‘Four
Star Export House’ certificate from the Joint Director of Foreign Trade, Government of India in June
2009 and has been bestowed upon with the status of ‘Nominated Agency’ under the Foreign Trade
Policy, which allows the Company to directly import precious metals. As a nominated agent, the
Company shall be able to import gold directly for its manufacturing purposes and thereby eliminate the
costs incurred on intermediaries.

Shift towards branded jewellery gaining momentum: The domestic jewellery market at present is
dominated by neighbourhood jewellers, which constitute 94% of the total market while the branded
segment constitutes the rest. However with improved awareness among consumers, primarily young
and educated people in the metros and Tier 1 cities, more people are showing preference for branded
jewellery due to the benchmarking of quality by jewellery retailers and availability of jewellery with
contemporary designs. Organised retailers also provide higher transparency and better after-sales
services

Risk and concern

Revenue Concentration: Around 50% of the Company’s exports are made to the Middle East, which is
one of the largest global hubs for gold jewellery sales. Also its revenue is dependent on a few major
clients. We believe that such overdependence on a particular client and geography raises the risk
profile significantly as the breakdown of business relations with any client or any political or economic
instability 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 with
stable/falling prices leading to an improvement in jewellery demand and vice versa. The significant
jump 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 by
unorganised players with over 90% of the market share. In the recent past, SGJHL has been able to



increase its market share by targeting young and educated customers in metros and Tier I cities with
the guarantee on purity of gold and presenting contemporary designs. However, the company’s
incremental growth is dependent on its ability to attract a large consumer base in Tier II and Tier III
cities 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.



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 Highlights
Income Statement (Standalone)
Particulars (` Mn) FY10 FY11 FY12E FY13E
Net sales 29,499 52,407 75,000 85,000
Other Operating Income 52 136 163 202
Total Operational Income 29,551 52,543 75,163 85,202
Raw Material Consumed 26,999 48,671 68,498 77,605
Employee Cost 163 247 384 417
Other Expenditure 347 232 300 340
EBITDA 2,042 3,393 5,981 6,841
Depreciation 23 60 196 234
EBIT 2,019 3,333 5,785 6,606
Other Income 4 37 31 47
Interest & Financial Charges 313 709 990 1,122
Profit Before Tax 1,710 2,661 4,826 5,532
Provision for Taxation 51 22 869 996
Profit after Tax 1,659 2,638 3,957 4,536
EPS (`) 27.34 43.48 65.21 74.75
*Lohia research estimates



Balance Sheet (Standalone)
Particulars (` Mn) FY10 FY11 FY12E FY13E
Assets
Net Fixed Asset 174 1,194 2,440 3,317
Investments 54 1,380 118 130
Current Assets 14,922 21,760 27,564 33,775
Total Assets 15,151 24,335 30,122 37,223
Liabilities
Equity Share Capital 485 607 607 607
Reserves & Surplus 4,881 10,131 13,875 18,198
Secured Loans 2,890 4,635 4,860 5,692
Unsecured Loans 600 1,100 1,080 1,308
Current Liabilities & Provisions 6,370 7,944 9,782 11,500
Deferred Tax Liabilities (76) (82) (82) (82)
Total Liabilities 15,151 24,335 30,122 37,223

Financial Ratios
FY10 FY11 FY12E FY13E
Profitability Ratios
Return 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 0.82
PBT/EBIT (Interest Burden) 0.85 0.80 0.83 0.84
EBIT/Sales (Operating Profit Margin) 0.07 0.06 0.08 0.08
Sales/Total Assets (Asset Turnover) 1.95 2.15 2.49 2.28
TA/NW (Financial Leverage) 2.82 2.27 2.08 1.98
Return on Equity (ROE) (%) 30.91 24.57 27.33 24.12

Liquidity Ratios
Current Ratio 2.34 2.74 2.82 2.94
Acid Test Ratio 2.04 2.31 2.32 2.45
Debt-Equity Ratio 0.65 0.53 0.41 0.37

Margin Ratios
EBITDA 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%



Cash Flow Statement

Particulars (` Mn) FY11 FY12E FY13E
Cash Flow from Operating Activities
PAT 2,638 3,957 4,536
Add: Depreciation 60 196 234
Operating Profit before WC changes 2,698 4,154 4,770
Changes in Current Assets (excluding cash) (6,993) (5,672) (3,039)
Changes in Current Liabilities 1,568 1,838 1,718
Changes in WC (5,424) (3,834) (1,321)
Net Cash flow from Operations (2,726) 320 3,449

Cash Flow from Investment Activities
Capital 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 Activities
Change in Equity 121 0 0
Change in Debt 2,245 205 1,060
Dividends Paid (426) (213) (213)
Others 3,037 (0) (0)
Net Cashflow from Financing Activities 4,977 (8) 847

Net Increase in Cash & Cash Equivalents (155) 132 3,172
Cash & cash equivalents at the beginning 6,586 6,431 6,563
Cash & cash equivalents at the end 6,431 6,563 9,735



Peer set Analysis
Titan Rajesh Gitanjali Shree
Particulars
Industries Exports Gems Ganesh
Current Share Price (`) 4,715 96 293 267
No. of Shares (Mn) 44.39 295.26 84.87 60.68
Face Value (`) 10 1 10 10
Market Cap (`Mn) 209,281 28,419 24,884 16,187
Sales (`Mn) 65,209 208,437 51,225 52,407
PAT (` Mn) 4,304 2,480 2,246 2,638
EPS (`) 96.96 8.40 26.46 43.48
P/E (x)* 48.62 11.46 11.08 6.14
P/BV 17.63 2.06 1.12 1.51
Dividend 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 Research

Comparison with Index

180
160
140
120
100
80
60
40
20
0

Source: NSE SGJHL S&P CNX Nifty



Outlook & Valuation

Short-Term View: The scrip is currently trading at ` 267. In the short-term i.e. next 1 to 2 months, we
expect 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 levels
where it should consolidate before the next move will happen which is only after the results are out for
the quarter ended June 2011.

Long-Term View: We are very bullish on this scrip from a long term perspective. We expect the scrip
to 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 hovering
around 10.32, the stock is underpriced. Based on discounted cash flow method, we have arrived at a
fair 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.



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.com

For Institutional Sales
Lohia 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.com

Institutional 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
Aditya Agarwal aditya.agarwal@lohiasecurities.com +91 33 40026783
Our Derivative & Statistical Research Team
Anand Lath anand.lath@lohiasecurities.com +91 33 40026685
Institutional Sales
Ashok Kamat ashok.kamat@lohiasecurities.Com +91 22 24901310
Deepak Parekh deepak.parekh@lohiasecurities.Com +91 33 40026737

Investment Rating
Buy > 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.


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