Goldiam International : A rare shareholder friendly and debt free Jewelry company

Stock Opportunities
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Wouldnt the employees much rather have a higher remuneration than get compensated in kind by way of vehicles, asset etc?
Disclosure: Studying, no investments yet.

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There was some increase in cost to procure the raw material due to Russian sanctions, but it was passed on to the customers. They have procured enough RM for the next 2-3 months. Working towards a 22% EBITDA margin which they are confident of achieving.

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Lab-grown diamonds come to the rescue of 2.5 lakh workers in Surat

Exports of lab-grown diamonds have increased by 108 per cent in FY22 as compared to FY21.

The natural diamond units have converted 20% of their production to LGD due to the rising demand for lab-grown diamonds in the US.
The US, which is reeling under inflationary pressure, is asking for lab-grown diamonds from India as it is cheaper by 40% compared to the natural diamond.

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Very nice article summarizing the current Indian lanscape of lab grown diamonds. Notes below

  • Global lab-grown diamond jewelry sales was $5.9 bn in 2020, making up 7-8 percent of the market. Diamonds below 2 carats are estimated to grow the fastest, with growth in the CVD segment outpacing HPHT
  • According to Gem & Jewellery Export Promotion Council, India exported $1.05 billion worth of polished lab-grown diamonds from April 2021 to January 2022, registering growth of nearly 113 percent
  • India exports mainly CVD diamonds and diamond studded diamond-set jewelry using both HPHT and CVD diamonds. Most of the HPHT rough used for jewelry manufacturing is imported from China
  • There are 2,500 active reactors in India, predominantly in Surat, and a few in Jaipur and Mumbai. Surat has 15 to 20 significant CVD growers with an installed base of 50 to 500 reactors
  • The average monthly output of a typical reactor is 125 carats and costs $175,000. The most commonly used reactor is Japan’s Seki
  • Leading cos: Real Illusion LLP (Jaipur; 80 reactors), Altr (positioned as integrated lab grown), Renaissance
  • The hardest part is to get consistent quality diamond
  • Vertical integration is key for long term success (grow, cut, polish, design and manufacture jewelry in-house)

Disclosure: Not invested

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Louis Vuitton investment arm has taken a stake in Lusix, a lab-grown diamond company based in Israel …shows the potential of LGD sector /players like Goldiam …

Discl: Invested ,hence views may be biased

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It is a possibility that this number can exceed if India and Europe also start using LGD

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Maybe I am off over here, and we will need to see quarterly results to be sure, but I have a few short term concerns about the company.

It’s overwhelmingly export-oriented, and given inflation, the fear of recession, etc., I worry if the end-consumers, and the businesses that Goldiam sells to will trim demand for the next few quarters. For the simple reason that jewellery is a discretionary purchase.

In terms of financial metrics (I really love the negative working capital cycle for online sales), and the company’s overall strategy (especially the LGD push), I think that the company is a sure shot long term bet. However, in the near term, I feel like I could park my cash somewhere else.

Open to pushback and differing opinions here :slight_smile:

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Ups and down will be there in the market. Once you know it’s clears your conviction and parameters then my philosophy is to hold it long term. But yes if you have better opportunity then surely shift.

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nice report on Lab grown diamond by PL

THE BEAT_Lab-Grown Diamonds.pdf (1.2 MB)

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Just tracking this company. Prima facie looks good. But few concerns:

  1. LGD EBITDA margins at 50% are too high to sustain. Managment feels 30% will be long term margins
  2. No real moat in the business
  3. Majorly exposed to US mkts where recession could be a spoilsport.
  4. Tradtional jewellery business may not have strong growth so it will partially offset superfast growth of LGD.
  5. Lastly, not sure how well LGD will be accepted. I think there is question mark over its resale value.
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I’m also not clear on how inflation may affect the sales of diamonds. Diamond sales in US are not tied to other discretionary spending. But I think US being mostly a credit economy and credit cost rising due to inflation we might see a dip in sales. I’m in wait and watch mode for next few quarters till this becomes more clearer.

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Good report
MNCL-Goldiam_International-Investment_idea.pdf (882.0 KB)

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Investor Ashish Kacholia entered Goldiam
https://twitter.com/VPickr/status/1612711143377899521?s=20&t=2zAdRb3Dcy8kRBqP49498g

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Industry growing but prices falling. Great article.

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The 2023 Union Budget promises to reduce the basic customs duty on seeds used in the manufacture of lab-grown diamonds in a bid to popularise their production in India— the duty on seeds for rough LGDs will be reduced from 5% to nil. The change will come into effect starting February 2,2023.

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10 Feb, 2023 15:58

149.25

-13.15 (-8.10%)

Volume 1014798

Todays L/H 148.00164.80

Reported Consolidated quarterly numbers for Goldiam International are:

Net Sales at Rs 178.18 crore in December 2022 down 18.34% from Rs. 218.19 crore in December 2021.

Quarterly Net Profit at Rs. 28.84 crore in December 2022 down 27.14% from Rs. 39.58 crore in December 2021.

EBITDA stands at Rs. 40.21 crore in December 2022 down 29.52% from Rs. 57.05 crore in December 2021.

Goldiam Inter EPS has decreased to Rs. 2.65 in December 2022 from Rs. 18.16 in December 2021.
4297c541-dcd5-4a23-b657-8be354959740.pdf (4.6 MB)

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To add:
Q2 was not good and Q3 is an improvement QoQ, FWIW

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