Limited downside in Gitanjali Gems: Ashish Chugh

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Limited downside in Gitanjali Gems , says Ashish Chugh , Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Gitanjali Gems has virtually changed the way jewellery used to be marketed in India, by launching multiple brands for different price segments in different markets and then selling their products through departmental stores and franchise network, which was unheard of a few years back. The company has spent significant amount of money for brand building. Some of the prominent brands of the company include Gili, Nakshtra, De Damas and Asmi."

He further added, "The company has got quite a good distribution network with about 120 distributors and the product is sold at around 2000 retail outlets which they plan to expand to 5000 in the next few years. On the financials of the company the first nine month sales are at about Rs 4900 crore, which are up by about 36%, the PAT is Rs 139 crore which results at Rs 16.45 EPS, annualized EPS is around Rs 22. So at the current price the stock is trading at PE multiple of just about less than 6. So from these levels the downside on the stock looks restricted."

"It's very difficult to give price targets but I think the stock has been consolidating for a very long time. We have seen in the market the stocks witness multi year consolidations also and smart investors spend more time in consolidating the stock because they know that it takes only 5 trading days for the stock to return 100%. So I would be more comfortable buying a stock, which is maybe consolidating rather than the one which has seen a sharp upmove in the recent times."