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PC Jeweller: A good quarter - Views on News from Equitymaster

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PC Jeweller: A good quarter

Feb 18, 2014 | Updated on Feb 19, 2014

PC Jeweller Limited (PCJ) declared its results for the third quarter of financial year 2013-2014 (3QFY14) as well as for the nine month period ending 31st December 2013 (9MFY14). The company reported 27.4% YoY growth in sales, while net profit grew by 19.5% YoY in the third quarter.

Performance summary
  • Net sales increased by 27.4% YoY during 3QFY14.
  • Domestic revenues increased by 21.3% YoY.
  • Revenues from exports witnessed a jump of 58.9% YoY in the quarter.
  • Despite the good topline performance, the company's operating margin was under some pressure due to higher input costs of raw materials. The operating profit increased by 11.1% YoY, lower than the growth in sales.
  • The other income came in at Rs 300 m in 3QFY14, significantly higher than the same recorded in the corresponding quarter last year.
  • However, higher interest costs and a big jump in the tax rate in the quarter, hampered the bottomline performance of the company to an extent. The net profit grew by 19.5% YoY while the net margin contracted by 0.4% in 3QFY14.
Financial performance snapshot
(Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
Net sales 10,185 12,980 27.4% 28,742 37,886 31.8%
Expenditure 9,053 11,721 29.5% 25,247 33,621 33.2%
Operating profit (EBIDTA) 1,132 1,258 11.1% 3,495 4,265 22.0%
Operating profit margin (%) 11.1% 9.7% -12.8% 12.2% 11.3%  
Other income 28 300   76 372  
Depreciation 26 31 18.8% 73 89 21.4%
Interest costs 293 404 37.9% 884 1,014 14.6%
Profit before tax 841 1,123 33.6% 2,614 3,535 35.2%
Tax 172 323 88.2% 532 808 51.9%
Profit after tax/(loss) 669 800 19.5% 2,082 2,727 31.0%
Net profit margin (%) 6.6% 6.2%   7.2% 7.2%  
No. of shares (m)         179.1  
Diluted earnings per share (Rs)*         19.8  
P/E ratio (x)*         4.8  
On a trailing 12 months basis

What has driven performance in 3QFY14?
  • PC Jeweller reported a robust topline performance on a YoY basis. The company's exports benefited from the weaker rupee in the December quarter compared to the same period last year. However the domestic business also held up well in the quarter due to the festive season.

  • The company's operating profit margin contracted by 1.4% YoY to come in at 9.7% in 3QFY14. The margin was impacted by the company's diamond business which did not witness any growth in the quarter despite an increase in raw material costs.

  • At the net level, the company's bottomline grew by 19.5% YoY. The big jump in other income helped to offset steep increases in depreciation, taxes and interest costs. The net margin however contracted by 0.4% on a YoY basis.

    Segment wise performance
    (Rs m) 3QFY13 3QFY14 Change
    Revenue (Rs m) 1,662  2,640 58.9%
    % of Total Revenues 16.3% 20.3%  
    EBIT Margin 14.0% 14.9%  
    Revenue (Rs m) 8,523 10,340 21.3%
    % of Total Revenues 83.7% 79.7%  
    EBIT Margin 10.7% 11.2%  
    Total Revenues 10,185 12,980 27.4%
What to expect?
At the current price of Rs 94.3, the stock is trading at 4.8 times its trailing twelve months (TTM) earnings per share (EPS).

PC Jeweller had a good quarter due to the festive season demand. The management expects volume growth to sustain in the near future due to the extended wedding season which would last till the end of 1QFY15. However the management's expectation is mixed with caution due to the prevailing economic situation in the country.

The management said that banks were now more confident regarding the 80:20 scheme. They are of the opinion that the industry is slowly but surely, adapting itself to the new environment. The management stated that supply would not be a concern any more for the industry. The concern, going forward, would be regarding sustainability of demand, especially after the end of the wedding season this year,

Despite the concerns, the company is staying the course regarding its expansion plans. We maintain our hold view on the stock. However, we do not recommend any mid cap stock to be more than 4%-5% of one's total portfolio.

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Mar 22, 2019 12:21 PM


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