PC Jeweller stock shines brighter
Jewellery stocks are shining bright on the bourses. PC Jeweller Ltd is a case in point, what with the shares appreciating as much as 76% so far this fiscal.
Sure, the stock has declined 2.4% since it announced its September quarter results on 13 November.
Still, its last quarter results are nothing to complain about. Revenue increased 21% year-on-year while profit rose at a much faster pace of 41% to Rs150.6 crore. Introduction of new stores, new product launches and same store sales growth of 17% in the domestic business boosted the company’s September quarter performance. However, exports performance was muted.
What’s also encouraging is that the company gave a strong guidance for the year. “The management believes that a growing shift towards organized retail post government initiatives such as demonetization, implementation of GST etc, new product launches, and aggressive store expansion (majority via franchise route) is expected to drive domestic revenue growth by 30% during FY18E,” said analysts from Emkay Global Financial Services Ltd.
Currently, the stock trades at about 21 times next fiscal year’s earnings, based on data from Bloomberg. In comparison, shares of Titan Co. Ltd trade at nearly 50 times next year’s earnings. Needless to say, if PC Jeweller delivers on its quarterly financials from here on, there is scope for the valuation gap to narrow between both companies.
The shift from unorganized to organized sector as a result of GST implementation along with store expansion plans is likely to help revenue growth for PC Jeweller. The company plans to reach 100 stores by the end of this fiscal.
According to ICICI Securities Ltd, PC Jeweller margins and return ratios are also expected to move up due to better revenue mix with rising share of domestic jewellery, higher contribution of franchisee stores, and operating leverage. “However, we build-in conservative estimates of 25 new stores against the management’s guidance of 30, and that results in our revenue and PAT growth estimates of 20.4% and 25.4% CAGR over FY17-FY20,” said ICICI Securities in a report on 14 November. CAGR is short for compounded annual growth rate.