Buy Gitanjali Gems; target of Rs 642: Firstcall

Firstcall Research is bullish on Gitanjali Gems and has recommended buy rating on the stock with a target price of Rs 642 in its February 23, 2013 research report.

“Gitanjali Group is world’s largest branded jewellery retailer. The company’s head quarter is in Mumbai. Gitanjali Gems, incorporated in 1986, is one of leading players in jewellery segment. Founded in 1966, it was the first group company to engage in cutting and polishing of diamonds in Surat, Gujarat. Today this $900 million multinational group is one of largest manufacturer, retailers and exporters of diamonds. The company is the first to produce the world’s smallest heart shaped diamond (0.03 carat) and developing some 25 patented facet patterns.”

“The company’s net profit jumps to Rs.1721.75 million against Rs.1288.61 million in the corresponding quarter ending of previous year, an increase of 33.61percent. Revenue for the quarter rose by 23.50percent to Rs.43549.80 million from Rs.35262.75 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.18.70 a share during the quarter, registering at 32.24percent increase over previous year period. Profit before interest, depreciation and tax is Rs.2994.94 millions as against Rs.2001.99 millions in the corresponding period of the previous year.”

“At the current market price of Rs.568.00, the stock P/E ratio is at 8.25 x FY13E and 6.70 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.68.88 and Rs.84.76 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 28percent and 31percent over 2011 to 2014E respectively.  On the basis of EV/EBITDA, the stock trades at 4.22 x for FY13E and 3.43 x for FY14E. Price to Book Value of the stock is expected to be at 1.40 x and 1.16 x respectively for FY13E and FY14E.  We recommend buy in this particular scrip with a target price of Rs.642 for medium to long term investment,” says Firstcall Research report.

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