Kalyan is a Kerala based Jewellery chain.Predominantly South India based.
They just opened 3 stores in Mumbai. You may have seen their TV ads with Amitabh Bachchan.
Results out. )- Q4 Sales 1144 cr (12.4% QoQ growth, YoY not available) )- NP 82 cr (up 23% QoQ) )- Net margin 7.2% (PQ 6.6%) Annual: )- Sales 4018 cr (up 32% over FY12) )- PBT 364 cr (up 37%) )- Tax rate 20.1% (PY 13%) â tax rate has been 20% each quarter this year, which was 10-12% in earlier years. )- NP 291 cr (up 26%) )- EPS is 16.1 and @ CMP of 115, pe is 7.2 )- NP margin 7.24% (PY 7.59%) )- Interest cost has increased by 65%. Debt / equity 0.17 (PY 1.03) as on year end. )- Export sales for FY13 is 1030 cr (up 2.8% over FY12) and is 26% of total sales which is progressively reducing compared to 33-34% in FY12 and 11. Domestic sales growth is 46% YoY. )- RONW is 21% (PY 36% and FY11 42%). This has been dragged down by IPO cash. Total cash and current investments is Rs. 39 per share as on 31.03.13. PCJ opened 5-6 stores in the last 2 months and expansion plans appear to be on track. Government related headwinds will continue to affect the sector. Gold prices are on pass-through basis. Volatility of gold prices is not good for the sector as buyers tend to postpone purchases expecting prices to fall. When gold prices had shot up last year, there was a temporary dip in volumes till buyers got used to the higher prices. So stable gold prices, whether higher or lower, will benefit companies like PCJ and Titan. Lets hope they remain so.
I consider myself lucky to get out of the name at 30% loss
Seems like the govt has destroyed the business model
There is some problem peculiar to PC Jewellery - besides industry level problem. Titan, TBZ, Thangamayil have stopped falling but this one keeps falling. Looks like some corp governance issue a la cebbco. Just my conjecture looking at the price chart.
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I would like to know more about this company. It seems to be posting excellent results and the dependency on gold jewellery is decreasing which I believe is a positive aspect. Are there any real corporate governance issues, because the stock price seems very attractive at 4-5 PE otherwise.
I'm posting the operating Profit margins & No. of days of working capital of PC jeweller and it's competitors:
OPM of PC jeweller are highest: It signifies that the company has competitive advantage as compared to others i.e either it has economies of scales or pricing power.
Need to check which one it is, I personally feel when a lady has to buy a jewellery she prefers variety and their strategy to provide large variety proves to be a differentiating factor:
| Mar'07 | Mar'08 | Mar'09 | Mar'10 | Mar'11 | Mar'12 | Mar'13 | ||
| PC Jeweller | Operating Profit Margin (%) | 5.98 | 6.98 | 9.18 | 10 | 9.96 | 13.61 | 12.13 |
| Working Capital Days | 0 | 142 | 156 | 190 | 155 | 181 | 213 | |
| Gitanjali | Operating Profit Margin (%) | -0.2 | 196 | -384 | 84.1 | 317 | 741 | 1,016 |
| Working Capital Days | 239 | 277 | 346 | 334 | 265 | 232 | 218 | |
| Thangmayil | Operating Profit Margin (%) | 5.02 | 4.77 | 7.63 | 6.76 | 8.84 | 10.41 | 5.44 |
| Working Capital Days | 48 | 48 | 79 | 80 | 96 | 98 | 105 | |
| TBZ | Operating Profit Margin (%) |
4.79 | 5.32 | 7.26 | 8.81 | 8.87 | ||
| Working Capital Days | 102 | 89 | 81 | 80.62 | 157 | |||
I'm posting the operating Profit margins & No. of days of working capital of PC jeweller and it's competitors:
OPM of PC jeweller are highest: It signifies that the company has competitive advantage as compared to others i.e either it has economies of scales or pricing power.
Need to check which one it is, I personally feel when a lady has to buy a jewellery she prefers variety and their strategy to provide large variety proves to be a differentiating factor:
| Mar'07 | Mar'08 | Mar'09 | Mar'10 | Mar'11 | Mar'12 | Mar'13 | ||
| PC Jeweller | Operating Profit Margin (%) | 5.98 | 6.98 | 9.18 | 10 | 9.96 | 13.61 | 12.13 |
| Working Capital Days | 0 | 142 | 156 | 190 | 155 | 181 | 213 | |
| Gitanjali | Operating Profit Margin (%) | -0.2 | 196 | -384 | 84.1 | 317 | 741 | 1,016 |
| Working Capital Days | 239 | 277 | 346 | 334 | 265 | 232 | 218 | |
| Thangmayil | Operating Profit Margin (%) | 5.02 | 4.77 | 7.63 | 6.76 | 8.84 | 10.41 | 5.44 |
| Working Capital Days | 48 | 48 | 79 | 80 | 96 | 98 | 105 | |
| TBZ | Operating Profit Margin (%) |
4.79 | 5.32 | 7.26 | 8.81 | 8.87 | ||
| Working Capital Days | 102 | 89 | 81 | 80.62 | 157 | |||
Some more data:
| FY09-13- Sales Growth | |||||||||||||
| EBITDA margin | PAT margin | Inventory Days | Net Asset Turnover | ||||||||||
| FY11 | FY12 | FY13 | FY11 | FY12 | FY13 | FY11 | FY12 | FY13 | FY11 | FY12 | FY13 | ||
| PCJ | 59% | 9.9 | 10.9 | 12 | 7.4 | 7.6 | 7.2 | 114 | 166 | 182 | 2.2 | 2 | 1.5 |
| Tara Jewels Ltd | 20% | 9.8 | 9.4 | 9.8 | 3.6 | 3.9 | 4.5 | 130 | 146 | 145 | 1.4 | 1.3 | 1.4 |
| Thangamayil Jewellery Ltd | 58% | 9 | 10.4 | 9 | 4.8 | 5.3 | 2.7 | 129 | 135 | 123 | 3.2 | 3.1 | 2.9 |
| TBZ | 25% | 7.3 | 8.8 | 7.3 | 3.3 | 4.1 | 5.1 | 130 | 132 | 225 | 2.8 | 2.5 | 1.9 |
| Titan Industries Ltd | 0.27 | 9.4 | 9.5 | 9.4 | 6.7 | 6.8 | 7.2 | 101 | 133 | 148 | 2.2 | 2.1 | 1.9 |
This is the growth% of operating income and EBIDTA and PAT
|
|
Growth % | ||||||||
| Op Income | EBIDTA | PAT | |||||||
| FY11 | FY12 | FY13 | FY11 | FY12 | FY13 | FY11 | FY12 | FY13 | |
| PCJ | 101 | 54 | 32 | 100 | 69 | 52 | 119 | 59 | 26 |
| Tara Jewels Ltd | 30 | 29 | 18 | 42 | 35 | 17 | 77 | 30 | 37 |
| Thangamayil Jewellery Ltd | 45.8 | 71.9 | 34.8 | 89.2 | 99.4 | -18.1 | 95 | 90.6 | -30.3 |
| TBZ | 35 | 16 | 19.1 | 85 | 40 | 21 | 133 | 45 | 25.6 |
| Titan Industries Ltd | 39.7 | 35.4 | 14.4 | 65.2 | 35.6 | 21.5 | 70.9 | 38.9 | 18.8 |
Excel - are you still closely tracking PCJ? With the good set of results posted (really liked the presentation/analysis they posted on BSE), looks like a candidate taking a close look at, due to the foll factors:
1). Co growing at 30% rates while maintaining margins better than/comparable to Titan/TBZ, even in the challenging environment of last year.
2). Stores grew from 30 to 41 in FY 2014 and expect to grow to 56 by 2015. Even if there is no rerating, this itself means 30%+ growth in next year. Co is also expanding from its north indian base to east where there are no organized (listed) players - opening stores in Ranchi, Patna, Guwahati etc
3). Co has increase dividend to 3 times from last year. It paid 10% last year and has paid 15% interim plus 15% final this year - showing confidence in earnings
4). Promoter shareholding has increase from 70% to 70.5% in last quarter
5). RBI/Govt has started reversing the restrictive steps imposed on gold. this would mean lesser working capital costs, more gold availability etc. With custom duty reduction expected in the next few months, it could give a boost to sales
6). International gold price has started to come off as well (tho cud be temporary). Also INR is expected to rise, decreasing the domestic gold price and increasing affordability.
While this seems like a candidate for rerating from its PE of 6 (compared to 20 of TBZ and 30 of Titan), even without the rerating it could be a 25% compounder for next 2-3 years.
Views invited from everyone
Was looking at latest results and short term borrowings jumped from 230 crores to 1002 crores , not sure if this is alarm .Otherwise it looks cheap with decent growth.
D/E ratio jumped from 0.17 to 0.6
@narendra It is because PC jewellers had gold leasing model earlier (Before the RBI imports restriction). In this model they used to pay on the basis of sale of the jewellery and thus they carried little risk due to fluctuation, also they had to carry little amount of gold as inventory but when the RBI imposed restrictions they could not use this Gold on lease model, they had to buy the gold as inventory. To buy this much quantity these jewelers had taken loan. This also explains the fall in most of the jewellery stocks. Titan also follows gold on lease model.
RBI recently made some relaxation on the restrictions of gold leasing model.Thats why the jump in gold/jewellery stocks
Thanks Nitin for the explanation.
Anybody Still tracking the company, I want to know whether they charge making charges as a % of gold value, or it is fixed .
Also anybody looked at the current Q1 numbers,the Top line has not grown but the bottom-line is 20 crs less than Q1 FY14 , which is explained by the difference in Financial costs, which is expected to change from this quarter going forward because of resumption of gold lease model.
Also does anybody have any idea how the newly opened stores are doing. The risk according to me for this company is that the new stores many not have same sales as the NCR stores , so for me there is concentration risk in this company
Any reason why the company trades at a discount to smaller and lesser profitable competitors like TBZ??
Regards,
Pratik Jain
Interesting development,
the stock has rerated quite strongly in the last few weeks, and this should give it a further boost.
Hi
I have been studying PC jewellers and have taken a initial small position in it:
Thinking:
If we compare Titan and PC Jewellers:
Sales in cr
2010 2011 2012 2013 2014
Titan 4674 6520 8838 10112 10915
PC Jewellers 984 1977 3041 4018 5324
Profit:
2010 2011 2012 2013 2014
Titan 250 430 600 725 741
PC Jewellers 78 147 230 290 356
Now if we compare the above no.s there are two things:
PC jewellers sales which were 1/5 th of titan in 2010 is now 1/2 of titan
PC Jewellers profit which was less than 1/3rd of titan is almost coming at 1/2 of titan
PE Titan 38
PE PC Jewellers 19
The number of focused initiatives that they are taking
1.Online sales (tie up with flipkart and Amazon) also launched Wearyourshine website
2. Expansion strategy increasing number of stores.(At some places will come up with franchise model)
3. Expansion will be through internal accruals no debt will be taken,
CONFUSION:
In their Cashflow statement for 2014 value for Cash from operating activity is (-809.66) Negative however their reserves have increased from 1209 to 1503.
what i am getting from above point is since now they pay for gold upfront so this coming as negative but eventually the cash generated is added to the reserves.
Now if I am right than i think the government regulation is not such a big threat as it will only mean some additional interest cost and also it will act as deterrent for new players:
Seniors please provide ur advice and suggestions also please give ur feedback on how should i improve on my strategy to analyse companies.
Regards,
Kapil
Anyone attending PCJ AGM tomorrow? Its in Delhi…
Any feedback would be highly appreciated.
Cheers
Neil Bahal
The stock has corrected about 20% from its highs and is near the 360 mark. Its a great story (1 store in 2004-05 and now has 56 and is the 2nd largest jewelry brand in India).
The financials and valuations look solid (not neccesarily undervalued though) while growth has been 20 - 30% for a long time. Have been doing a bit of scuttlebutt and compiled into a checklist that I compiled from The Investing Checklist book.
Attached is the same. Has a few red flags around lack of CSR and typical promoter based compay. However overall still looked attractive to me.
Seniors please advice and guide.
Varun
PC Jewelers.xlsx (13.4 KB)
P.S. Have a small stake in the company.