Sky Gold Limited is engaged in the business of designing, manufacturing, and marketing gold jewellery. The co. follows a B2B model where the products are mainly sold to mid-range jewellers and boutique stores that sell these products through online platforms and retail stores. The Company mainly deals in 22 Karat gold jewelry, offering a wide variety of designs to suit the preferences of the end customer. They provide an extensive range of designs and also use studded American diamonds and/or colored stones in many of their jewelry products. The company has reputed clients like Malabar Gold, Joyalukkas, S R Gold, etc and now the company further added Reliance and Tanishq as its new customers.
SKY GOLD LTD
SCREENER.IN
Narration
Jan-00
Mar-13
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Trailing
Best Case
Worst Case
Sales
-
84.11
183.31
164.41
548.85
806.84
721.89
795.54
785.58
1,153.80
1,309.02
1,694.61
1,363.51
Expenses
-
83.58
178.67
159.83
541.18
796.54
708.98
784.98
765.29
1,117.15
1,251.30
1,619.89
1,335.40
Operating Profit
-
0.53
4.64
4.58
7.67
10.30
12.91
10.56
20.29
36.65
57.72
74.72
28.11
Other Income
-
-
-
-
0.03
0.61
1.19
2.33
10.56
0.96
2.06
-
-
Depreciation
-
-
0.22
0.30
0.34
0.52
0.47
0.44
1.12
1.42
3.15
3.15
3.15
Interest
-
-
2.98
2.85
3.42
5.91
6.09
6.39
8.02
11.15
15.92
15.92
15.92
Profit before tax
-
0.53
1.44
1.43
3.94
4.48
7.54
6.06
21.71
25.04
40.71
55.65
9.04
Tax
-
-
0.51
0.50
1.32
1.42
1.72
1.25
4.76
6.42
10.36
25%
25%
Net profit
-
0.53
0.94
0.94
2.63
3.05
5.82
4.81
16.95
18.61
30.36
41.49
6.74
EPS
-
3.79
4.70
4.70
3.33
2.85
5.44
4.50
15.84
17.39
28.26
38.62
6.28
Price to earning
31.92
17.93
20.19
5.82
15.66
41.22
41.22
20.72
Price
-
-
-
-
-
91.00
97.50
90.75
92.25
272.45
1,164.85
1,591.88
130.05
RATIOS:
Dividend Payout
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
11.55%
OPM
0.00%
0.63%
2.53%
2.79%
1.40%
1.28%
1.79%
1.33%
2.58%
3.18%
4.41%
TRENDS:
10 YEARS
7 YEARS
5 YEARS
3 YEARS
RECENT
BEST
WORST
Sales Growth
30.06%
16.02%
16.92%
46.87%
46.87%
16.02%
OPM
2.06%
2.07%
2.13%
2.47%
4.41%
4.41%
2.06%
Price to Earning
22.12
22.12
22.12
20.72
41.22
41.22
20.72
Key risks/threats -
Customer concentration risk
Presence in the highly competitive and fragmented jewellery business
Sky Gold seems to have a robust strategy and a promising outlook:
Client Focus: Their main concentration lies in B2B sales to mid-range jewelry outlets and boutique stores. Key clients like Malabar, Joyalukkas, BG Jewellers, SR Gold, and MJ Jewellers played a pivotal role in driving their revenue in FY23.
Production Capacity: Generating 750-800 kg per month highlights their substantial manufacturing capabilities.
Ambitious Revenue Targets: With a current revenue of 1200 crores, their aim to hit 5000 crores in 2 to 2.5 years demonstrates an ambitious growth plan, expecting consistent 20-25% revenue growth over the coming years.
Enhancing Margins: By investing in machinery from Italy and other countries, they aim to raise their margin to 5%, showcasing their commitment to operational efficiency.The new facility presents an opportunity for them to enhance their margins. It incorporates state-of-the-art features, including cutting-edge filtration equipment that minimizes gold loss throughout the production process.
Scaling Workforce: Planning to expand their workforce from 500 to 800 employees indicates preparations for heightened production and business expansion.
Adapting to Customer Growth: Proactive readiness to meet increased demand as many of their clients expand their stores by 20-25%.
Capitalizing on Seasonal Peaks: Recognizing the historically strong performance of Q3 and Q4 within their sector, aligning with their expectations for better performance during these quarters.
Market Anticipation: Anticipating an upsurge in footfall due to an expected 35 lakhs of marriages in India, thereby boosting their customers’ store traffic and, consequently, Sky Gold’s revenue.
The best quality manufacturing with lower cost is their target. In summary, Sky Gold shows a comprehensive understanding of their market, aims for substantial growth, and strategically prepares to leverage industry trends and customer expansions.
Hi Mohit, they seem to be a negative cash flow company. Between the years 2019-2023, they have posted approximately 91 crores of EBITDA and OCF of -25 crores on a standalone basis. The consolidated numbers are not that different. Any thoughts on this?
Diamond market in particular has been suppressed for past 2 years.
With possibility of FED rate cut high, i tend to assume there is a merit to jewellary story in general.
How does sky gold stand with others ( Senco,Goldiam…etc) ?
are jewellery stocks in frenzy ?
The consolidated and standalone cash flow is the same because there are no other subsidiaries/sister concerns with which one would consolidate the cash flow.
I don’t know what negative cash flow you are talking about - An investment was made (expansion) so 18.37cr went into that and the net cash flow is positive, moreover they have stocks of HDFC bank and TCS worth 75 crores which will be liquidated soon to bring in more cash to repay debt. So there is nothing in the cash flow that worries me much…just the usual business.
Hi Mohit, I agree that the standalone and consolidated is the same. I am talking about CFO and not CFI. I would be very interested in the stock if the CFO was positive, which I don’t see as per screener. How are their investments a reflection of the negative CFO of the past few years?
Hi. I was checking the conditions of the warrants issued. Any idea why did they issue warrants at 425 which was so much lower than the prevailing share price at the time?
Also, why do they need additional capital at all? Have they explained the rationale behind the preferential allotment anywhere?
Don’t know why they have issued at lower price, but i think that they gave some discounts as the stock price was high.
And they need this additional capital for working capital. They are guiding for 4,500 Crores to 5,000 Crores of revenue which is 50%-60% Growth. For this much growth they need working capital. Already they have taken debt. But they need more money for this much growth.
An Interesting Fact,
I was watching an interview of the JMD of RBZ Jewellers Ltd. He said that Organized Jewellery Retailers Has 40% Market Share, but organized manufacturers have only 15% market share. So, there is a gap. As the retailers are expanding their stores, they need more organized retailers to fulfil the demand.
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 .
Sky Gold is having 50Cr investment in HDFC bank which is around 50% of their net-worth. Annual Report 23 says that all Non Current Investments (HDFC bank and others) are pledged for short term loans; so I doubt they can liquidate it soon. anybody can explain this? is my understanding correct? Thanks in advance
