From : Chirag
at 09:35 PM - Aug 30, 2008
2 2 Bookmark
Stock Idea From: - www.indianmoneyplus.com
Scrip: - Rajesh Exports Ltd.
CMP: - 46
BSE Code:- 531500
52 Week H / L: - 168.30 - 45.80
Market Cap: - 1059.73
Target: - 120 (1 Year)
Rajesh Exports is involved is business of exporting gold and diamond cutting. Recently this stock has hammered due to weakening rupee. Dollar has appreciated at Rs 44 which come to 17 months low. The second reason why it came down is Gold from 13 K sliped to10.8K.
Rajesh Export now the largest established private gold buyer, accounting for 1.2% of the global gold trade. Having attained this scale of operation, the company is now shifting its focus to find ways of increasing its net profit margin.
In order to meet its objective of increasing its net profit margin, Rajesh Exports has identified three major divers of growth:
Jewellery retailing: increasing presence across value chain by catering to different segments of consumer needs
Diamond jewellery: expanding product range with higher margins
White labels: expanding its market by supplying white labels to retail chain stores across the world.
Key Financials: - Its sales keep on increasing almost every quarter. Before the recent split and bonus of this scrip this was one of the favourate scrip of the investors.
EPS & PE both have bottomed out.
Rajesh Exports Ltd had reported revenue growth of 40.7% on year-on-year basis to Rs 25.25 bn for Q4 FY 08. Profits grew by 46.8% YoY to Rs 489m as against expectation of Rs 528m,according to market analysts.
This was due to high tax outflow in the last quarter, which was not provided for in the previous quarters. Operating margins declined by 298bps YoY to 3.3% due to higher share of its low margin bulk business.
For the year, revenue grew by 25.7% YoY to Rs86.67bn and PAT grew by 103.9% YoY to Rs2.07bn against our expectation of Rs2.11bn and OPM increased by 130bps to 4.4%.
The Real Estate: - Rajesh Exports has about four million sq.ft. land in Bangalore and Kerala. It is now planning to develop these properties and acquire competence in property development by setting up a 100% subsidiary, Bangalore Infra. The company may look at property development as a separate business in future.
Calculations: - Calculating all the above points and the real estate it has the Market cap should be the double of what it is now. So the stock prices will give 100 - 200 % returns in 1 Year.
Positive Factors: -World’s largest gold exporter at lowest cost.
Stock is currently trading at low valuations.
Big order book.
Foreign investors increased their stake by 10% .
FIIs bought this stock at around Rs 95 then why should you wait to grab this stock at Rs 46.
Key Concerns: - Continued volatility in gold prices and adverse market conditions have forced Rajesh Exports, India’s leading gold and diamond manufacturer to go slow on its retail expansion plans.
The 100 Shubh stores which were expected to be rolled out by FY09, has been reduced to 40 due to continued volatility in gold prices and adverse market conditions. It is not expanding its Laabh stores either, and would keep the number of stores at a 30 in
However, the growth in bulk business to Middle East would compensate for the loss of growth in retail, according to company sources.
The company expects its other businesses of bulk exports,white labels and diamond jewellery to more than compensate for the slowdown in its retail division.
The slowdown in its retail business is likely to affect its overall financial performance.
The Real Multibagger.
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