Great to see some good research on this stock.
Quite a few Marquee investors have entered the stock via preferential allotment . Including Ashish kacholia at the price of 412 .
At 5,000 cr sale at 5 % profit will result in operating profits will go to 250 cr yearly, net profit around 220 cr .At a PE of 20 the stock should be trading at around 4500 market capitalization in 2-3 years .
The question is what PE should be given to such a company , if it can grow consistently even after 2-3 years that above 25 % + and is indicating a secular trend like the jewellery retails , market can give this company a PE of 30 or 40 also .At those PE market valuations should be closer to 6500 or 8500 cr once they achieve yearly net profit of 200-220 cr.
I don’t believe PE of 70 or 80 makes sense like the retail jewellery companies as companies like sky gold are way down the value chain , have limited moats and limited pricing power .
There are still areas and ways in which the management can increase their margin in the future as well as accelerate growth of revenues . The money raised from the preferential allotment will be used in the coming year for those purposes too .
A current risk is the swift rise of the share price which has happened in the past months, if Q3 results disappoint due to whatever reason or any bad news , the stock can correct drastically to 750 levels .
Invested from Rs 300 level in the stock .
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