shree ganesh jewellery house

Shree Ganesh Jewellery House

Limited

Prakash Narayan Sharma [email protected]

LOHIA SECURITIES LTD.

mailto:[email protected]

Shree Ganesh Jewellery House Ltd.

2 Lohia Research is also available on Bloomberg LSEC<go>,Thomson Reuters 033-4002 6600/6700


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




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 Profile…

MARKET DATA

Bloomberg Code SGJ:IN

Reuters Code SHRG.NS

Price (`) 267

Target Price (`) 300

Time (in Months) 12

Dividend Yield (%) 2.25%

52 Week High/ Low(`) 284/145

Equity Capital(` Mn) 606.83

Face Value (`) 10

Market Cap (` Mn) 16,187

Avg. Vol.NSE(3M) 2,61,833

INDEX

Index Weightage (%)

BSE Small Cap 0.277%

SHARE-HOLDING PATTERN (%)

Promoters 70.66

DIIs 4.66

FIIs/NRIs/OCBs 12.81

Corporate Bodies 5.14

General Public 6.73

As on 31/03/2011

RELATIVE PERFORMANCE (%)

Nifty Stock Stock over

Nifty

1 Month -1.1% -1.3% -0.2%

3 Month 1% 75% 74%

12 Month 7% 134% 127%

Company Background Shree Ganesh Jewellery House Ltd. is one of

the largest manufacturer and exporter of handcrafted gold Jewellery in India, exporting primarily to countries such as U.A.E., Singapore, and Hong Kong

The product portfolio includes handcrafted and hallmarked gold jewellery, gold enameled jewellery, gold jewellery studded with precious stones and Italian fusion jewellery

The Company has manufacturing units located in Mondalpara, Manikanchan SEZ at West Bengal, which is presently the only jewellery SEZ in West Bengal and at Domjur (upcoming)

Current order book size stands at `50,000 Million

Investment Rationale Recovery in global economy to aid company’s

performance Derisked business model Plans of expansion in customer base Plans of expansion of product portfolio Expansion of retail presence in India Backward Integration Strategic location of manufacturing units and

strong skilled craftsmen base Excellent design capabilities Granted the status of “Four Star Export

house” & “Nominated agency” Shift towards branded jewellery gaining

momentum

Key Risk to Investment Overdependence on particular clients &

geography Fluctuations in gold prices 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% * P/E, P/BV computed taking CMP of `267 as on 13/06/2011.

13th

June 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

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%

•Promoters engaged in family business of gold jewellery manufacturing1992-2002

•Year of Incorporation2002

•Took over partnership firm "Shree Ganesh Jewellers" engaged in jewellery business2003

•Set up manufacturing unit at Manikanchan SEZ2004

•Promoters awarded "Young Achievers Award" by SinGems2006

•Opened first branded retail jewellery store•Amalgamation of 6 Group companies2007

•PE investment by Credit Suisse•"Outstanding Export Performance" award by GJEPC

2008

•"Outstanding Export Performance" award by GJEPC

•Turnover of Rs. 2000 Cr.•Received "Four Star Export House" status2009

•"Outstanding Export Performance" award by GJEPC

•IPO of Rs. 3,150 Mn2010




Brands

Brand

Name

Brand Definition Product Profile Weight Range Design Profile

Gaja Gold Designer jewellery for

all occasions

Plain gold jewellery 25gm – 65gm Traditional,

Thematic,

Contemporary

Gold

Bridals

Designer Bridal gold

jewellery

22K Plain & studded

gold jewellery

65gm – 125gm Traditional

Gold

Elements

22K Gold accessories

for men

Plain Gold (Casting

jewellery)

25gm – 60gm Trendy, Modern,

Fusion

Mari Gold 22K Gold light weight

jewellery

Plain Gold (Casting

jewellery)

01gm – 25gm Trendy, Modern,

Fusion

Sitaare 22K Gold Jewellery for

kids

Plain Gold Jewellery 01gm – 15gm Trendy, Modern,

Fusion

You 18K Diamond Heart

collection

Diamond Jewellery

(Casting jewellery)

005cts – 0150cts

25gm – 45gm

Trendy, Modern,

Fusion

Distar Diamond & 18K/14K

Gold studded jewellery

Diamond Jewellery

(Casting jewellery)

005cts – 35cts

25gm – 45gm

Trendy, Modern,

Fusion

GM Gold 1gm Gold jewellery Gold plated

jewellery

005cts – 35cts

25gm – 45gm

Trendy & Fusion

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.

Source: IMF (World Economic Outlook, April 2011)

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




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.




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

8,691

12,284

17,921

11,029 11,173

Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11

Net Sales (Rs. Mn)

499

637

842

683

476


PAT (Rs. Mn)

8.23

10.50

13.88

11.25

7.85


EPS (Rs./Share)

0%

2%

4%

6%

8%

10%

Operating & Net Margins

OPM NPM




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 *Lohia research estimates

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% *Lohia research estimates




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 *Lohia research estimates




Peer set Analysis

Particulars Titan

Industries Rajesh

Exports Gitanjali

Gems Shree

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;

Comparison with Index

020406080

100120140160180

SGJHL S&P CNX NiftySource: NSE

SGJHL Industry P/E

6.14

10.32

P/E Comparison

Source: Moneycontrol.com, Lohia Research




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: [email protected]

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: [email protected]

Institutional Team:

Our Fundamental Research Team

Name E-Mail Id Contact No.

Basanti Gourisaria [email protected] +91 33 40026822

Rajkumar Mondal [email protected] +91 33 40026734

Gitika Bhansali [email protected] +91 33 40026821

Krishna K Agarwal [email protected] +91 33 40026631

Prakash N Sharma [email protected] +91 33 40026732

Prabir Adhikary [email protected] +91 33 40026734

Sonu Shah [email protected] +91 33 40026732

Sailesh Sarda [email protected] +91 33 40026732

Our Technical Research Team


Aditya Agarwal [email protected] +91 33 40026783

Our Derivative & Statistical Research Team


Anand Lath [email protected] +91 33 40026685

Institutional Sales


Ashok Kamat [email protected] +91 22 24901310

Deepak Parekh [email protected] +91 33 40026737

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.

Investment Rating

Buy > 15 % Hold (5%-15%) Sell < 5%



shree ganesh jewellery house

Documents

jewellery industry

jewellery sez

enameled jewellery

quality jewellery

ofthe jewellery

earlierpurchasers of

hallmarked gold jewellery

jewellery dividend yield