CRISIL assigns valuation grade of 5/5 to Thangamayil

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CRISIL assigns valuation grade of 5/5 to Thangamayil

CRISIL Research has come out with its report on Thangamayil Jewellery. The research firm has maintained the fundamental grade of 2/5 to the company in its January 24, 2012 report.

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CRISIL Research has come out with its report on Thangamayil Jewellery . The research firm has maintained the fundamental grade of 2/5 to the company in its January 24, 2012 report.

Thangamayil Jewellery Ltd's (Thangamayil's) Q3FY12 revenues were in line with CRISIL Research's expectations because gold prices were strong as expected and the new branches in Kambam, Aurppukottai and Salem (Tamil Nadu-based shops opened in the earlier quarters) ramped up sales.

Thangamayil's operating profitability was also better than expected. While we believe this could be due to the accrual of some inventory gains during the quarter, we await clarity from the management. We may revise our estimates post interaction with the management. We maintain our fundamental grade of 2/5.

Q3FY12 result analysis
• Revenues increased 80% y-o-y riding on a 38% rise in gold price and higher volumes from six new stores added in the past one year (the total count is now 14 stores). But it grew a marginal 5.5% q-o-q despite a 9% increase in average gold prices. We believe Thangamayil's existing stores are facing some pressure as demand for gold jewellery dipped in Q3FY12. Consistently higher gold prices have impacted overall gold jewellery demand in India in Q3FY12, despite the festive and wedding seasons.

• EBITDA more than doubled y-o-y and EBITDA margin was higher 218 bps y-o-y at 11.1%. But it declined 12% q-o-q from 13.4% in Q2FY12 since Q2FY12 recorded significant inventory gains.

• The company reported PAT of Rs 171 mn against Rs 84 mn in Q3FY11, up 104% y-o-y, but down 23% q-o-q. Accordingly, EPS was Rs 12.5 vis-a-vis Rs 6.1 in Q3FY11 and Rs 16.2 in Q2FY12.

Valuation: Current market price has strong upside
We continue to use the P/E multiple to value Thangamayil. Based on the relative valuation of its peers, we continue to assign a P/E multiple of 6x to Thangamayil's FY13E EPS of Rs 35.5. We maintain our fair value estimate of Rs 213. At the current market price of Rs 150, the valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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