Apr 9, 2013|
Should you invest in this newly listed jeweller?- II
Jewellery retailing has become even more competitive with the entry of 3 new players in the listed space. In our previous article, we presented an overview of these three newly listed jewellery retailers namely Tribhovandas Bhimji Zaveri (TBZ), Tara Jewels (Tara) and PC Jewellers (PCJ). We will now have a look at their past financial performance. We will have a look at how their expansion plans have panned out since their respective IPOs and how they fare in terms of current valuations.
Last 4 years performance
Let us have a look at important financial parameters of these companies for the last 4 years.
Average growth for last 4 years for TBZ, Tara and PCJ has been 34%, 21% and 77% respectively. PCJ has the highest growth rate, however, this comes on a relatively much smaller base as the company started operations in 2005 itself. Similarly, net profits too display higher growth numbers for PCJ in particular because of low base effect.
In terms of profit margins, PCJ has the highest among the three. Presently these margins are comparable with the industry leader, Titan Industries (Tanishq) too. FY12 operating profit margins for PCJ and Titan have been 10.9% and 10.3% respectively. Net profit margins are currently higher than Titan (6.7%) at 7.6% in FY12.
Jewellers require huge inventory to stock ion their showrooms and are resultantly working capital intensive in nature. Their short term borrowings are much higher than the long term borrowed funds. Debt to equity is thus relatively high for jewellery companies. The same has been 2.44, 1.53 and 1.25 times respectively for TBZ, Tara and PCJ.
Tara Jewels has the worst return ratios among the newly listed peers. Here too, PCJ seems to be outperforming its peers in recent years.
PE: Price to Earnings
|Sales growth (in %)
|PAT growth (in %)
|Operating profit margin (in %)
|PAT margin (in %)
|Debt to equity (x)
|RoCE (in %)
|RoE (in %)
TTM PE as on April 8, 2013
Looking at the increasing consumer interest towards branded jewellery, all these companies have charted out huge expansion plans for the next couple of years. However, what needs to be seen is whether they are able to execute these successfully and on time. One major constraint in the expansion process is finalising of the locations for the stores. This is particularly important as stores are taken on lease and leased rentals are determined on the basis of showroom locations. Also, the location would decide the footfall in the showroom and resultantly the sales.
How have these done post the IPO?
Although its only been a while since these companies got listed, it would be interesting to note that TBZ has already opened 10 new stores in past one year since its IPO. PCJ which came out with public offer only 3-4 months back, will be opening 4 additional stores in April. Tara however has not yet launched any new store.
In terms of valuations, both Tara and PCJ trade at reasonable valuations of 8 times their respective trailing twelve month (TTM) earnings. However, TBZ is currently trading at 24 times it TTM PE.
Although all these companies are into the jewellery business, their business models are quite different from each other. While Tara is majorly into exports, TBZ has been in the jewellery retailing business for quite some time and does not export at all. In recent years, PCJ has been the best performer amongst the three. PCJ seems to have double advantage of good past performance and stock available at attractive valuations. However, it is not enough to compare these companies amongst themselves. The jewellery industry is fiercely competitive with the presence of established players like Titan and Gitanjali. Thus, investors would have to look at other peers too before deciding upon a stock.
More Views on News
Aug 10, 2017
However, growth at these levels are unlikely to be sustainable.
Mar 7, 2017
Equitymaster analyses Initial Public Offering (IPO) of Avenue Supermarts Limited.
Feb 14, 2017
Titan Industries declared its results for the third quarter of financial year 2017 (3QFY17). While topline growth was 14.7% YoY, net profit grew by 13.1% YoY during the quarter. Here is our analysis of the results.
Nov 16, 2016
Titan Industries declared its results for the second quarter of financial year 2017 (2QFY17). While topline growth was flat, net profit grew by 23.5% YoY during the quarter. Here is our analysis of the results.
Aug 9, 2016
Titan Industries declared its results for the first quarter of financial year 2017 (1QFY17). The company reported 3.3% YoY increase in sales, while net profit fell by 16.3% YoY during the quarter.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407