Gitanjali Gems
BSE ID : 532715 NSE ID : GITANJALI
RECOMMENDED PRICE 195.00
PEAK FROM RECO 649.50 233.08%
CURRENT PRICE 1.06 Resource id #12
Gitanjali Gems is in the top three listed gem and jewellery units with growth of atleast 30% plus on CAGR basis for the next 3 years. It trades at a PER of 13 (FY 07 financial) has potential to appreciate by atleast 50% in the next 6 to 12 months.
Geetanjali Gems, a sparkling gem.
Gitanjali Gems had entered the Capital Market on 16.2.2006 with a public issue of 1.70 crore equity shares of Rs.10 each at a price of Rs.195 per share to expand its retail operations, develop a SEZ at Hyderabad , make investments in J/V and Associates for jewellery retailing.
For FY 06, the company is likely to cloak a turnover close to Rs.1,500 crores and net profit of close to Rs.60 crores resulting in an EPS of above Rs.10 on fully diluted equity of Rs.59 crores. The board of the company is meeting for the same on 25.05.06.
For FY 07, the management has given a guidance of Rs.2,000 crores as topline and bottomline of around Rs.90 cores giving an EPS of Rs.15 plus. This translates into a PER of 13 for the stock against industry average of 20 and above, at current market price of Rs.195.
Promoter's stake of 68 % enthus confidence. Benett Coleman is also holding 20 lakh equity shares equivalent to 3.39 % stake in the company which they have subscribed in October, 2005 at Rs.300 per share.
The wholly owned subsidiary of the company, Hyderabad Gems SEZ Ltd. is developing a Gems and Jewellery Special Economic Zone at Hyderabad on 200 acres of land (over 1 crore sq.ft constructed area) which is expected to be executed in phases through fiscal 2008. The company has already got allotment of 75 acres in first phase from Andhra Pradesh government while remaining 125 acres will come in two phases of 75 acres and 50 acres. The aggregate cost of the land is Rs.10 crores while estimated cost for development of SEZ will be Rs.40 crores. The company proposes to invest Rs.50 crores in its WoS, and developed land will be leased out to other gem and jewellery companies for setting up their operations.
The company has very reputed brands like Nakshtra, Asmi, D'Damas either fully owned or in joint venture with other national and international partners for which the company plans to open retail outlets across the country. An amount of Rs.135 crores has been earmarked for this.
The company has mobilized Rs.330 crores via public issue which shall largely be used to open retail chains, and develop SEZ .Both shall improve the business models of the company as also bottomline. The brands of the company are very well marketed and enjoys good repute. All this will improve the company's valuation.
The company is in top three listed gem and jewellery units with growth of atleast 30 % plus on CAGR basis for the next three years . With this kind of visibility share at Rs.195 which trades at a PER of 13 (FY 07 financial) has potential to appreciate by atleast 50 % in the next 6 to 12 months . One can safely buy this stock in this volatile market for safe returns.
S.P.TULSIAN.
Investment Advisor.
Disclaimer: Writer may be deemed to be concerned or interested in this recommendation.
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