Why Thangamayil Jewellery Share Price is Rising

Share price of Thangamayil Jewellery, one of the top jewellery companies in India by growth, has seen a spectacular rise in the past two months.

Shares of the company have witnessed a bullish breakout and are trading at their all-time high levels.

Let's find out why.

Record numbers on the back of rising gold prices

Last week, Thangamayil Jewellery posted its highest ever quarterly revenue of Rs 9.6 billion (bn) for the quarter ended June 2023. This was on the back of higher gold prices.

Rising prices of the safe haven metal resulted in higher price realisation while the company also registered strong growth in sales across product categories.

As a result, net profit shot up more than three times to Rs 590 million (m) compared to Rs 190 m in the same period last year.

In an exchange filing, the company said that it enjoyed benefits of better realisation on gold price movement up to Rs 320 m.

Quarterly Results Snapshot

Rs m, standalone	Jun-23	Jun-22	Mar-23
Revenue	9,601.0	8,264.1	7,715.4
Operating Profit	924.4	361.4	587.2
OPM (%)	10%	4%	8%
Net Profit	586.1	189.8	310.3
NPM (%)	6%	2%	4%

Data source: Equitymaster

The company posted these record quarterly numbers on top of a strong FY23 performance where profit doubled to Rs 1.1 bn while revenue grew more than 50% to Rs 31.5 bn.

In the last five years, the company's revenue and profits have grown at a double digit CAGR driven by an uptick in gold prices and a revival of demand.

Expanding retail outlets

In the quarter under review, Thangamayil opened a retail outlet in Kumbakonam in Tamil Nadu, taking the total number of retail outlets to 54.

The company is actively expanding retail presence in Tamil Nadu, a state with the largest share of India's gold consumption. It commands a strong market presence in the Tier II and Tier III cities of Tamil Nadu. It also has a dominant position in the Madurai micro market.

Opening a store requires heavy investment and then too, there's no guarantee the company can turn that outlet profitable soon. But given Thangamayil's established market position, its store in Trichy recorded revenue of more than Rs 1.5 bn in the first year of operations.

Today, the company informed exchanges it will opening the Tirumangalam Branch on 3 August 2023. It's planning to increase store space via brownfield expansion. It has allocated Rs 100 m for capex for upgrading all the stores.

Rising gold prices

Shares of gold jewelers including Titan, are on a steady rise on the back of rising gold prices.

Higher gold prices boost realisations and revenue for players like Thangamayil, which is largely a gold ornaments player. It derives close to 90% of its revenue from gold.

There's also the flip side to it and that's why Thangamayil's earnings are exposed to volatility in gold prices.

Hallmarking effect

Earlier this year, it was announced that the sale of hallmarked gold jewellery or gold artefacts without a 6-digit alphanumeric Hallmark Unique Identification Number (HUID) is prohibited by the Bureau of India Standards (BIS) after 31 March 2023. This was extended till 30 June 2023.

This basically means that jewellery players will now sell jewellery with higher levels of purity in order to get mandatory hallmarking certification. This is a big positive for organised players like Thangamayil as it would reduce the pricing differential between the unorganised and the organised segments.

The shift is already happening, and jewellery players have said that consumers are shifting towards branded players. Most of the jewellery market is unorganised at the moment which gives high growth opportunity for Thangamayil.

Bonus shares

A month ago, the company also declared bonus shares in the ratio of 1:1.

Bonus shares are free shares of companies allocated to existing shareholders, based upon the number of shares that they own.

Some people think that issuing bonus shares can be beneficial for share prices. The logic behind this is that the increased marketability of the shares leads to increased demand. This, in turn, pushes the share price up.

So some of the upmove in the stock could also be attributed to the bonus issuance.

How Thangamayil Jewellery shares have performed recently

In the past one month, shares of the company have rallied over 65%!

On a year-to-date basis, Thangamayil Jewellery has surged 132% while in the past five days, shares are up 30%.

Thangamayil Jewellery shares hit a 52-week high of Rs 1,443 today before succumbing to profit booking. The 52-week low of Rs 472 was touched on 9 November 2022.

Have a look at the table below to compare Thangamayil with its peers:

Comparative Analysis

Company	Thangamayil	PC Jewellery	Senco	Tribhovandas	Asian Star
ROE (%)	22.4	-9.7	19.5	3.2	6.9
ROCE (%)	17.6	-1.0	17.1	6.5	5.9
Latest EPS (Rs)	43.5	-7.3	20.7	6.0	35.8
TTM PE (x)	30.2	0.0	20.0	15.2	20.0
TTM Price to book (x)	7.8	0.4	2.4	1.1	1.2
Dividend yield (%)	0.5	0.0	0.4	1.9	0.2
Industry PE	71.9
Industry PB	12.0

Data Source: Ace Equity

About the company

Thangamayil Jewellery is one of the leading jewellery retailers in India.

Based out of Tamil Nadu, the company sells gold, silver, diamond, and platinum jewellery.

It has four manufacturing facilities with in-house goldsmiths to craft jewellery according to the latest trends.

To know more, check out Thangamayil Jewellery's financial factsheet and its latest quarterly results.

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