Buy Thangamayil; target of Rs 625: HDFC Securities

HDFC Securities' research report on Thangamayil

Thangamayil’s (TJL) net revenue grew by 32.5% in-line with our estimate; albeit on a favourable base (13% de-growth in base quarter due to pre-GST preponement of sales in 1QFY18). The bump up in sales is largely SSSG-led (store renovations-led) as gold/silver volume increased by 33/21% despite shift of festive season to 3Q. In spite of the strong top-line growth, gross margin cracked 37bps to 8.5% (est.: 9.9%) led by change in product mix and higher discounted sales. EBITDA margins expanded 10bps to 4.5% as op lev gains kicked in. EBITDA/APAT grew by 35/71% (a 19/11% miss).

Outlook

We reiterate a BUY rating with DCF based TP of Rs 625/sh (implied P/E - 18x Sept-20E EPS).