Results seems to be in-line. The growth seems to be fine. Not so great, not so bad. Need to see the growth in coming quarters. Any views / analysis
Results, Profits, Long term view of company
All looks great to me, I believe downfall in price is just by retailers.
After results yeah upside potential is still there considering MorganStanley Report.
Disc: Invested
don’t think 3% yoy quartery growth looks great
17% growth YOY in revenue
29% growth YOY in PAT
How is that not attractive ?
That’s like company will double itself in 5years in revenue even if they go with this speed.
points to consider/summary- IGI
good results fy 24 in this market
for investment call
Positive:
- it is the only listed player in diamond certification globally other not listed ngo kind
- post ipo complete IGI comes under IGI india
- reasonable growth projection of lab grown diamond business cagr of 13 to 15 percent on various projection reports
in india
Neutral:
- promoter pledge/ PE eventhough committed can change
to another global PE which should not be a great cause of concern
if management continues present CEO and his team
Threats ( Not sure)–Points to consider
- in lab grown diamond whether govt certification is mandatory in India
donot think so
(Lab-grown diamond industry to continue with self-regulation: Commerce Minister Piyush Goyal - The Economic Times)
2.Are end buyers insist on certification or reputed players like titan ( natural diamond) can self certify themselves now or in near future which will take away the objective of this company ( threats)
any person who recently bought or in their circle bought lab grown or natural diamond can clarify the threat points based on their experience or any report or point read can share in this forum - certification part of the business
which will eventually decide the growth of this company
Attended conference call, here are the key pointers i could comprehend:
1.At crossroads: they repeatedly skip the questions on guidance by simply saying industry is at an inflection point and are optimistic about the future.
2.volume vs value: since price of certificates decreased compared to increase in volume. md clearly said this is a volume business with lab grown diamonds getting more acceptance from Indian middle class and realization may drop in future.
3. no segmental revenue given(requested by one analyst to publish half yearly).
4.Synergy with igi Belgium nd Netherlands: Asked about the recent acquisitions replied, west nd china are the bigger consumers of LGD’s, so these subsidiaries help igi to reach end market.
5.Flat seasonality: since q4( diwali season ) is the peak season, question was asked about the stunted growth of 0.6% QoQ, mgt said there was an extended factories shutdown(originally
10-15 days but extented ) to control supply. moreover CFO said they have no seasonality effect on topline.
6.Lab grown vs Original: mgt said, they are both complementary and supplementary to each other.
7.Certification Amid Changing Trends: questions were asked about, whether there will be a need for certification in future, when lab grown diamond value decreases. management replied, there will be even more need for certification to identify original ones from lab grown diamonds.
the biggest challenge to this company/business is
if lab grown diamond price falls further/stays and end customer reluctance to pay for the certification of IGI if there is a cost involved and jewelry company does self certification via bill as proof ( an example)
the logic is natural need certification ( original) and lab grown there is no need unless govt or regulation insists which is not there
India is a major market and price sensitive one for certifications .other developed markets may still pay which could be a possibility
In US it is fairly common to buy jewelry online, and there countless D2C sites there. Certification becomes even more important while buying jewelry online. If this trend develops anywhere in the world, that helps cos like IGI.
From a recent Deloitte report on India’s Jewelry sector-
The inability to assess quality was the most frequently cited pain point associated with online jewellery purchases, highlighted by 77 percent of respondents. Reflecting this concern, industry certifications, such as IGI certificates and BIS hallmarking, were ranked as the most important feature influencing online purchases, with 88 percent of respondents including them in their top three considerations.
Another thing I want to say is, for people who buy diamonds, IGI is like a household name for them. They will ask for certification even if prices go much lower from here. It’s just habit.
Disc: just my thoughts, invested, very new to markets
In India, 1 carat of gold costs around Rs.1730 and if I am not wrong as per BIS regulations it is mandatory to have Hallmarking certification to ascertain the gold purity.
I fail to understand the logic of not making it mandatory for natural or LGDs and the cost of 1 carat is much higher than gold and it starts from Rs. 2.5 lakhs in case of natural and 50K in case of LGDs. These certifications are presently done on voluntarily basis because the customers demand it.
The Indian diamond market operates largely on trust-based transactions, especially for smaller diamonds and unbranded jewelry. Customers buying high-value diamonds often seek certification, but for smaller stones, certification is not commonly demanded. Whereas in the U.S. and Europe, most customers strongly demand certification, making it a de facto standard, even if not legally required.
So, I think Indian consumers need more awareness and also the government and industry should come together to work on implementing mandatory standardized certification system for diamonds too in order to provide assurance about a diamond’s quality. In such scenario company needs more ads like these https://www.youtube.com/watch?v=UPMMB_32FzY to push strong customer awareness. Good to see company made same ad in multiple languages.
Only time will tell how this space evolves in the next few years.
Well, the management does not provide any guidance, so how can we say the sales growth was lower or higher than expected? As per Morgan Stanley report, they expect a growth of 15-20% for CY 24 to CY 26. and the company had delivered 17%, which appears to be inline with the analyst estimates. Am I missing something?
1.Instead of providing clear guidance, management repeatedly evade the question by stating that the industry is at an inflection point and expressing generic optimism about the future.
2. 3% yoy q4 also the reason(indian entity)
yes it delivered 17% yoy growth in cy24 but management clearly said there will be no seasonality effect on the business, hence stunted growth in q4 raises questions on future growth.
Does anyone have Moneycontrol pro subscription to post the report here?
You can check articles by NDTV & BS … they are free to read.
moneycontrol some content pasted
Strong growth outlook
IGIL has indicated that a healthy growth momentum is expected to sustain. This is owing to the increasing traction of LGDs as LGD certification accounts for about half of IGIL revenues.
Given the higher affordability and similar look and feel, as compared to natural diamonds as well as environment friendly characteristics, LGDs are continuing to gain traction.
The share of LGDs in the overall polished gem quality diamond production is expected to increase from ~18 percent in CY23 to ~30 percent in CY28. After gaining healthy traction in the US, LGDs are gaining increasing popularity in the Indian market.
IGIL, with a dominant market share of ~55 percent in LGDs, is expected to be the prime beneficiary of the continued shift towards LGDs. According to IGIL, the certification of diamonds is important in the LGD space, given the build-up of consumer trust required to create the category.
IGIL is looking to leverage its strong presence and relationship with leading manufacturers and retailers in India. India is the global hub for diamond cutting and polishing, with about 90 percent of global share.
Moreover, the increasing preference for coloured gemstones and modern studded jewellery styles also provide an additional growth opportunity for diamond jewellery certification companies like IGIL. IGIL’s management has guided for 15-20 percent top-line CAGR over the next 3-5 years.
Proposed acquisition completed; margins to improve
IGIL completed the proposed acquisition of two group companies, IGI Netherlands and IGI Belgium. As indicated in the Initial Public Offering (IPO) in December 2024, IGIL paid a consideration of Rs 1,346 crore, out of which Rs 1,300 crore was paid from the IPO proceeds, for the acquisition. After the acquisition, all group companies operating in different geographies have merged into a single entity called IGIL.
With one integrated entity on a global basis, IGIL will realise the operational synergies, leading to a reduction in overall costs. Also, IGI Belgium is expected to witness an improvement in demand. CY24 was affected by the Russia-Ukraine conflict and subdued demand in key markets. We expect IGI Belgium’s margins to revert to the pre-COVID levels, and this would help in overall margin improvement.
High entry barrier business with strong return ratios
Independent diamond certification is a high entry barrier business. Building integrity and trust among consumers is the key moat in the business. IGIL, with about 50 years of experience, has established a strong brand for itself in the industry, with GIA being the only other player of scale in the diamond certification market.
Diamond certification business is a high cash-generating business, with minimal capex requirements. Hence, return ratios are extremely strong, with IGIL making a return on equity (RoE) and return on capital employed (RoCE) of 35-40 percent.
Valuations
At the current market price (CMP), the stock is trading at a P/E of 31 times CY2026 earnings projections. Considering the high entry barriers in the industry and healthy earnings outlook, we advise investors to add the stock.
@Sudarsan93 Thanks. The missing part of the report is below:
Highlights:
- Mixed Q4CY24 results
- Growth momentum to sustain
- Expect margins to improve
- Niche business with robust return ratios
IGIL; CMP: Rs 407; Market Cap: Rs 17,602 crore; Rating: Overweight, a leading diamond certification company, posted mixed results for Q4CY24.
While the top-line growth moderated owing to extended breaks by manufacturers, after the festive season in India, margin expansion, owing to cost-control measures and operational efficiencies, led to strong earnings growth.
IGIL is well-placed to deliver a healthy earnings growth of about ~16 percent CAGR (compounded annual growth rate) in the medium term, driven by the increasing traction of LGDs (lab-grown diamonds) globally. IGIL has a dominant market share in LGDs and is strengthening presence in new geographies.
The company is undertaking big marketing campaigns on a global scale, which emphasize the need for independent diamond cortication to increase consumer awareness and enhance trust in the industry.
Margin improvement, thanks to benefits of scale, would aid earnings growth. IGIL requires relatively less Opex to scale up business.
We like IGIL, considering the high entry barriers to the industry, healthy cash ow generation and strong return ratios. IGIL’s valuations are attractive, given the business strengths and earnings visibility. Hence, we recommend to add the stock.
December 2024 performance:
Consolidated revenue growth moderated to 6 percent year on year (YoY) in Q4CY24. This is primarily attributable to the moderation in the key India business, which accounts for about 70 percent of revenues.
Extended breaks by diamond polishers, after the festive month in October 2024, in order to maintain a normalized inventory, led to a subdued 3 percent growth in the India business during the quarter.
International businesses, mainly in Belgium and the Netherlands, posted healthy double-digit growth in Q4.
While there was growth moderation, margins improved about 600 bps YoY. Cost-control measures and benefits of scale, owing to increase in volumes, improved margins. Lower depreciation expenses and higher other income further boosted profitability. IGIL posted a strong 45 percent earnings growth in Q4CY24.
Src: Goldiam Concall
Earlier: When Lab-Grown Diamonds Were New
All major retailers in the U.S. required certification to clearly separate lab-grown diamonds from natural diamonds.
Now: Lab-Grown Diamonds Are Common
More than 50% of inventory in stores consists of lab-grown diamonds. Retailers no longer see full certification as necessary for all lab-grown jewelry.
Goldiam Management:
Certification is a pass-through cost, meaning they charge it to their retail customers. Some large retailers are now asking to reduce or remove certification for entry-level lab-grown jewelry to cut costs.
Bottom Line: As lab-grown diamonds become mainstream, retailers are moving away from mandatory certification for cheaper jewelry items.
