CMP 122.00

Target Price 138.00

ISIN: INE553K01019

JAN 16th

, 2013

SHREE GANESH JEWELLERY HOUSE LTD

Result Update: Q3 FY13

BUYBUYBUYBUY

Stock Data

Sector Gems & Jewellery

BSE Code 533180

Face Value 10.00

52wk. High / Low (Rs.) 139.50/65.20

Volume (2wk. Avg ) 223000

Market Cap ( Rs in mn ) 7402.96

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 65936.10 79123.32 90200.58

EBITDA 4461.90 5470.45 6457.94

Net Profit 2935.80 3222.16 3504.93

EPS 48.38 53.10 57.76

P/E 2.52 2.30 2.11

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX Shree Ganesh Jewellery House Ltd

Source: Company Data, Firstcall Research

SYNOPSIS

Shree Ganesh Jewellery House Ltd is a

leading manufacturer and exporter of

handcrafted, machine-made gold jewellery.

Shree Ganesh Jewellery House Ltd has a fresh

Certificate of Incorporation to "Shree Ganesh

Jewellery House (I) Limited".

Shree Ganesh Jewellery House Ltd has

demonstrated the results during the quarter;

the growth of Net Profit stands up by

173.41% to Rs.588.10 million.

Shree Ganesh Jewellery House Ltd signed and

joint venture agreement to invest Rs. 50

crore in Jewellery Manufacturing Facility in

Dhaka.

During the quarter, the company has received

“ECGC-D&B Indian Exporters’ Excellence

Awards” attributed to leading exporters of

the country.

During the quarter, Alex Astral Power Ltd,

the Group Company, received Indian

Industrial Excellence award organized by

IEDRA towards one of the best PLF

generating Company.

Net Sales and operating profit of the company

are expected to grow at a CAGR of 20% and

10% over 2011 to 2014E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Shree Ganesh Jewellery House Ltd 122.00 7402.96 48.38 2.52 0.56 60.00

Rajesh Exports Ltd 141.15 41675.90 14.08 10.02 2.10 60.00

Winsome Diamonds & Jewellery Ltd 35.80 3747.30 7.59 4.63 0.30 0.00

Gitanjali Gems Ltd 587.50 53973.40 28.05 20.90 2.13 30.00

Investment Highlights Standalone

Results updates- Q3 FY13,

Shree Ganesh Jewellery House Ltd has emerged as

India’s largest handcrafted jewellery manufacturer

within a decade of existence With a highly skilled

design team and tie-ups with leading fashion

designers, it provides exclusive customized

jewellery and develops an average 500 designs a

month, reported its financial results for the quarter

ended 31 Dec, 2012.

Months Dec-12 Dec-11 % Change

Net Sales 28865.40 14667.40 96.80%

PAT 588.10 215.10 173.41%

EPS 9.69 3.54 173.41%

EBITDA 1150.90 533.00 115.93%

The company’s net profit springs up to Rs.588.10 million against Rs.215.10 million in the corresponding quarter

ending of previous year, an increase of 173.41%. Revenue for the quarter stands up by 96.80% to Rs.28865.40

million from Rs.14667.40 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.9.69 a share during the quarter, registering at 173.41% increase over previous year period.

Profit before interest, depreciation and tax is Rs.1150.90 millions as against Rs.533.00 millions in the

corresponding period of the previous year.

Expenditure :

During the quarter the total expenditure cost rose

by 98 per cent mainly on account of increase in

Stock in trade along with consideration of material

consumed in the rupee impact and witnessed. Total

expenditure in Q3 FY13 was at Rs.28061.40 million

as against Rs.14195.10 million in Q3 FY12. Purchase

of stock in trade cost Rs.3328.60 against Rs.2705.40

millions in the corresponding period of the previous

year. Other Expenditure was at Rs.59.40 million and

Consumption of Raw Materials is Rs.53.80 million in

Q3 FY13 are the primarily attributable to growth of

expenditure.

Segment Revenue

Latest Updates

• Shree Ganesh Jewellery House Ltd has a fresh Certificate of Incorporation from the Registrar of Companies,

West Bengal, the name of the Company is changed from "Shree Ganesh Jewellery House Limited" to "Shree

Ganesh Jewellery House (I) Limited".

• Shree Ganesh Participated in India Show at Dhaka, Bangladesh. Shree Ganesh Jewellery House Ltd signed

and joint venture agreement to invest Rs. 50 crore in Jewellery Manufacturing Facility in Dhaka. Shree

Ganesh designs stole the limelight at a glittering fashion show.

• Shree Ganesh Jewellery House Ltd has awarded the Company for Outstanding Export Performance and

contribution in the Trade, with two categories:

� Studded Precious Metal Jewellery Exports by units from EPZ/EOU Complexes

� Plain Precious Metal Jewellery Exports by units from EOU/EPZ Complexes.

• Shree Ganesh Jewellery House Ltd acquired interest in a 25 MW solar power project in Gujarat that

commenced commercial production from March, 2012. The Company expects to generate Rs.60 cr in

revenues from this business in 2012-13.

• Shree Ganesh Jewellery House Ltd extended jewellery manufacture to retail to capture the mark-up in the

last mile. Commissioned 46 retail stores across India, Tied up with Bharti Retail for shop in shop

arrangement to increase its domestic retail presence.

Company Profile

Shree Ganesh Jewellery House Ltd. is a 5900 Cr. (US$ 1.34 billion) turnover company and is a Govt. of India

recognized '4 Star Export House'. The company is one of the leading manufacturers and exporters of handcrafted

gold jewellery from India and the shares of the company are listed in Bombay Stock Exchange and National Stock

Exchange of India.

The company is promoted by Mr. Nilesh Parekh and Mr. Umesh Parekh. SGJHL’s headquartered in Kolkata, with

subsidiary offices in Hyderabad, Chennai, Bangalore, Delhi. Shree Ganesh Jewellery House Ltd. is one of the

largest manufacturer and exporter of handcrafted gold Jewellery in India, exporting primarily to countries such

as U.A.E., Singapore, and Hong Kong. The products portfolio includes handcrafted and hallmarked gold jewellery,

gold enameled jewellery and gold jewellery studded with precious stones. The products, designed by a team of

highly creative designers, have presence across different price points to cater to all customers across high-end,

mid-market and value market segments allowing the Company to build a large and diverse portfolio of designs.

SGJHL received the “Four Star Export House” certificate from the Joint Director of Foreign Trade, Government of

India in June 2009 and has been bestowed upon with the status of “Nominated Agency” under the Foreign Trade

Policy, which allows the Company to directly import precious metals.

Manufacturing units

The company is into manufacturing and exports of gold jewellery, diamond jewellery, gemstone studded

jewellery and light weight Italian jewellery. The Company has manufacturing units located in Mondalpara,

Manikanchan SEZ which is presently the only jewellery SEZ in West Bengal and Domjur, West Bengal (upcoming)

and U.A.E. The Company has 44 retail outlets across the country under the brand ‘GAJA’. SGJHL entered into a

strategic alliance with Bhartii Retail for shop-in-shop arrangements in its retail stores run by the name of ‘Easy

Day’ and has set up two outlets (Mumbai and Bangalore) under this arrangement.

Products

The product mix includes handcrafted hallmarked Plain and Antique Gold Jewellery, Gold enamled and Studded

Jewellery, Diamond Studded Jewellery-Casting, exclusive mughal style Jadau and Kundan Jewellery, Ruby-

Emerald Jewellery, Polki Chakri Jewellery and Light Weight Italian Gold Jewellery, Gold Bangles and Chains-

Handcrafted and Machine made.

Accreditations

• Award for Outstanding Export Performance by Gems and Jewellery Export Promotion Council in the

category of Plain Precious Metal Jewellery Exports from Units by EOU/EPZ, 2010-11.

• Recognized as highest exporter of gems and jewellery from India by DHL-CNBC International Trade

Awards

• Recognized as a Four Star Export House

• Nominated Agency under the Foreign Trade Policy, permitting the Company to directly import precious

metals.

Subsidiary Companies

• Gokul Jewellery House Private Ltd

• Easy Fit Jewellery Ltd

• Sumit Jewels Private Ltd

• Shree Ganesh Jewellery House FZE

• Gaja Finance Private Ltd

• Shree Ganesh Jewellery House (Singapore) Pvt Ltd.

• Veeyu India Private Ltd

Brands

Financial Highlight

Balance sheet as at March31st, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

Particulars March Rs in Millions 2012A 2013E 2014E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 606.83 606.83 606.83

Reserves and Surplus 12643.31 15865.47 19370.41

Net worth (a) 13250.14 16472.30 19977.24

Non-Current Liabilities:

long-term borrowings 1003.20 1007.60 1009.98

Long Term Provisions 3.18 2.54 2.67

Long term liabilities (b) 1006.38 1010.14 1012.65

Current Liabilities:

Short-term borrowings 6562.57 8859.47 11162.93

Trade Payables 17245.29 24143.41 29454.96

Other Current Liabilities 339.54 482.15 621.97

Short Term Provisions 684.86 828.68 994.42

Current Liabilities © 24832.26 34313.70 42234.27

Total (a+b+c) 39088.78 51796.15 63224.16

ASSETS:

Non-Current Assets:

Fixed Assets:

Tangible Assets 1708.10 2391.34 3060.92

Intangible Assets 0.65 0.45 0.25

Capital work-in-progress 163.24 228.54 292.53

(d) 1871.99 2620.33 3353.69

Deferred tax assets 68.74 82.49 95.69

Non Current Investments 448.04 815.43 1304.69

Long Term Loans and Advances 1024.86 3382.04 6865.54

(e) 1541.64 4279.96 8265.92

Current Assets:

Current Investments 134.60 97.96 127.35

Inventories 5148.53 7310.91 8796.07

Trade Receivables 21146.76 26787.00 30805.05

Cash and Bank Balances 8228.36 9462.61 10408.88

Short Term Loans and Advances 863.50 1079.38 1306.04

Other Current Assets 153.40 158.00 161.16

(f) 35675.15 44895.86 51604.55

Total (d+e+f) 39088.78 51796.15 63224.16

Annual Profit & Loss Statement for the period of 2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 52543.00 65936.10 79123.32 90200.58

Other Income 36.50 805.30 1079.10 1316.50

Total Income 52579.50 66741.40 80202.42 91517.09

Expenditure -49149.70 -62279.50 -74731.98 -85059.15

Operating Profit 3429.80 4461.90 5470.45 6457.94

Interest -709.40 -1265.00 -1922.80 -2595.78

Gross profit 2720.40 3196.90 3547.65 3862.16

Depreciation -59.80 -223.90 -259.72 -285.70

Profit Before Tax 2660.60 2973.00 3287.92 3576.46

Tax -22.10 -37.20 -65.76 -71.53

Net Profit 2638.50 2935.80 3222.16 3504.93

Equity capital 606.80 606.80 606.80 606.80

Reserves 10130.64 12643.31 15865.47 19370.41

Face value 10.00 10.00 10.00 10.00

EPS 43.48 48.38 53.10 57.76

Quarterly Profit & Loss Statement for the period of 30th

June, 2012 to 31st

Mar, 2013E

Value(Rs.in.mn) 30-June-12 30-Sep-12 31-Dec-12 31-Mar-13E

Description 3m 3m 3m 3m

Net sales 20282.50 22790.50 28865.40 25112.90

Other income 415.30 106.00 288.90 317.79

Total Income 20697.80 22896.50 29154.30 25430.69

Expenditure -19520.10 -21447.60 -28003.40 -23103.87

Operating profit 1177.70 1448.90 1150.90 2326.82

Interest -411.20 -534.00 -527.30 -606.40

Gross profit 766.50 914.90 623.60 1720.43

Depreciation -57.50 -58.70 -58.00 -60.90

Profit Before Tax 709.00 856.20 565.60 1659.53

Tax 0.40 -30.50 22.50 -24.89

Net Profit 709.40 825.70 588.10 1634.63

Equity capital 606.80 606.80 606.80 606.80

Face value 10.00 10.00 10.00 10.00

EPS 11.69 13.61 9.69 26.94

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 43.48 48.38 53.10 57.76

EBITDA Margin (%) 6.53% 6.77% 6.91% 7.16%

PBT Margin (%) 5.06% 4.51% 4.16% 3.97%

PAT Margin (%) 5.02% 4.45% 4.07% 3.89%

P/E Ratio (x) 2.81 2.52 2.30 2.11

ROE (%) 24.57% 22.16% 19.56% 17.54%

ROCE (%) 21.18% 22.51% 23.47% 23.81%

Debt Equity Ratio 0.53 0.57 0.48 0.42

EV/EBITDA (x) 1.96 1.51 1.08 0.83

Book Value (Rs.) 176.95 218.36 271.46 329.22

P/BV 0.69 0.56 0.45 0.37

Charts

Outlook and Conclusion

� At the current market price of Rs.122.00, the stock P/E ratio is at 2.30 x FY13E and 2.11 x FY14E

respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.53.10 and

Rs.57.76 respectively.

� Net Sales and operating profit of the company are expected to grow at a CAGR of 20% and 10% over 2011

to 2014E respectively.

� On the basis of EV/EBITDA, the stock trades at 1.08 x for FY13E and 0.83 x for FY14E.

� Price to Book Value of the stock is expected to be at 0.45 x and 0.37 x respectively for FY13E and FY14E.

The third quarter witnesses a healthy increase in overall sales as well as profitability on account of powerful

combination of exciting products, an enhanced store network and robust infrastructural Support system. We

expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story

in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.138.00 for

Medium to Long term investment.

Industry Overview

The gems and jewellery industry has an important role in the Indian economy. India is the largest market for gold

jewellery in the world. Gold dominates the Indian jewellery market and formulates almost 80 per cent of the

market share, which is followed by fabricated studded jewellery including diamond and gemstone studded

jewellery. Further, India has emerged as the largest cutting and polishing industry for diamonds in the world.

In fact, the two major segments of the gems and jewellery business in India are gold and diamond jewellery, as

per an Exim Bank report.

Moreover, Southern India is poised to be the biggest and the fastest growing jewellery market in the whole

country. While Tamil Nadu and Kerala are known for plain gold jewellery, Andhra Pradesh and Karnataka have

emerged as good markets for studded jewellery.

Industry Structure

Indian gems and jewellery sector is expected to grow at a compound annual growth rate (CAGR) of around 13

per cent during 2011-2013, as per a RNCOS report titled 'Indian Gems and Jewellery Market Forecast to 2013'. At

present, Indian gems and jewellery market is highly fragmented, and is rapidly transforming into an organised

sector due to the growing acceptance of branded jewellery market.

Gold

Gold with its intrinsic luster and ease of fabrication has always been the jewellers' favourite metal and forms the

backbone of the precious jewellery industry. India's culture and mythology embrace gold. India's traditions of

unparalleled craftsmanship and skill are exemplified by its gold jewellery manufacturing, with the majority of

pieces still made meticulously by hand. India is one of the largest consumers of gold in the world.

• Tribhovandas Bhimji Zaveri Ltd (TBZ) has marked its foray into Kolkata and East India by inaugurating

two showrooms. In addition, TBZ further made its presence in Vapi, the biggest city in Valsad district of

Gujarat, surrounded by Daman, Dadra and Nagar Haveli, by inaugurating its exclusive brand outlet

• P Mangatram Jewellers showcased the world's lightest necklace, designed in 18k gold and embellished

with precious stones, weighing just 3.5 grams at The India International Jewellery Show (IIJS) 2012

Diamonds

Diamonds have always enjoyed a special place among precious gemstones. India has the distinction of being one

of the first countries to introduce diamonds to the world. Earlier, diamond jewellery was limited to a very small

elite segment of the population but now it has found way in various segments of consumers. Besides, India has

emerged as one of the world's leading diamond cutting and polishing centres.

• The Gems and Jewellery Export Promotion Council (GJEPC) in collaboration with Moscow Diamond

Bourse (MDB) organised the second edition of Indo-Russia Jewellery Summit in Mumbai. The Summit has

been able to present tremendous opportunity for many visitors who came looking at India as a sourcing

hub for the first time

• GJEPC strives to focus on penetrating new emerging markets in the world, with special attention on India

and China, to promote diamonds and boost consumer confidence, said Mr Vipul Shah, Chairman, GJEPC

• Gujarat is one of the major states in India promoting gems and jewellery sector as one of the thrust areas

for development. Gujarat, having the largest human resource pool in the country in diamond cutting and

polishing, accounts for 80 per cent of the total diamonds processed in India

Colored Gemstones

The colored gemstones segment includes remaining forms of jewellery which includes precious gemstones like

emeralds, sapphires, rubies and tanzanite; and semi-precious gemstones like silver, pearls, etc. Traditional Indian

gemologists identified around 84 precious and semi-precious stones, amongst them nine stones form the

'Navratnas or the nine gems'.

• Renaissance Jewellery, manufacturers and exporters of studded precious metal jewellery, were felicitated

by GJEPC, at its 39th annual awards presentation at New Delhi. Renaissance won the award for

outstanding export performance under the category 'Studded Precious Metal Jewellery Exports'

Exports

The total gems and jewellery exports from India during April 2012 to September 2012 stood at US$ 19,902.47

million, including that of cut and polished diamonds at US$ 7,824.75 million, gold at US$ 10,717.71 million and

coloured gemstones at US$ 167.13 million, besides others, according to the provisional data by Gem & Jewellery

Export Promotion Council of India (GJEPC). The domestic jewellery market is pegged at about US$ 16 billion-US$

18 billion. The industry is also a leading foreign exchange earner accounting for more than 12 per cent of India's

total exports, as per an industry body report.

The gems and jewellery industry in India registered considerable growth in its volume of exports from US$ 25.4

billion in the 2009 to US$ 46.36 billion in 2011, a net growth of 82.5 per cent.

Government Initiatives

India appears as a very attractive opportunity for major brands to establish their presence. The growing

domestic market in India along with export advantage of the industry and the Government's decision to allow

foreign direct investment (FDI) up to 51 per cent in single brand retail stores have attracted various foreign

players to the Indian market.

The Government of India has cleared three FDI proposals including that of Italian jeweller brand Damiani, to set

up stores in India under the single brand retail policy. The firm will set up a 51:49 joint venture (JV) with Mehta's

Pvt Ltd, as per a Ministry of Finance official.

Foreign Direct Investment Policy

• The Government of India allows 100 per cent FDI in gems and jewellery sector through the automatic

route

• For exploration and mining of diamonds and precious stones, FDI is allowed up to 74 per cent under the

automatic route

• For exploration and mining of gold and silver and minerals other than diamonds and precious stones,

metallurgy and processing, FDI is allowed up to 100 per cent under the automatic route

Foreign Trade Policy (2009-2014) Initiatives

Import of gold of 8 karat (k) and above is allowed under replenishment scheme subject to import being

accompanied by an Assay Certificate specifying purity, weight and alloy content. Duty Free Import Entitlement

(based on Free on Board (FOB) value of exports during previous financial year) of consumables and tools, for:

• Jewellery made out of:

o Precious metals (other than gold & platinum) - 2 per cent

o Gold and platinum - 1 per cent

o Rhodium finished silver - 3 per cent

o Cut and polished diamonds - 1 per cent

• Duty free import entitlement of commercial samples shall be US$ 6187.9

• Duty free re-import entitlement for rejected jewellery shall be 2 per cent of FoB value of exports

• Import of diamonds on consignment basis for certification/ grading & re- export by the authorised

offices/agencies of Gemological Institute of America (GIA) in India or other approved agencies will be

permitted

• Personal carriage of gems and jewellery products in case of holding/participating in overseas exhibitions

increased to US$ 5 million and to US$ 1 million in case of export promotion tours

• Extension in number of days for re-import of unsold items in case of participation in an exhibition in USA

increased to 90 days

• In an endeavour to make India an international trading hub for diamond, it is planned to establish

"Diamond Bourse (s)"

Road Ahead

India possesses world's most competitive gems and jewellery market due to its low cost of production, highly

skilled, low-cost and best artisan force for designing and crafting jewellery, along with strong government

support in the form of incentives and establishment of Special Economic Zones (SEZs).

India is emerging as a huge consumer market for jewellery and other luxury products and thereby appears as a

very attractive opportunity for major brands to establish their presence in the Indian market.

In fact, the five-day long 29th edition of the Indian International Jewellery Show (IIJS) event organised by GJEPC,

witnessed the participation of over 800 companies from India and overseas and received 20,000 pre-registration

from national visitors and over 3,000 from international visitors. The event had a congregation of delegations

from trade associations across India and from a host of international destinations like Bangladesh, China, Dubai,

Hungary, Iran, Japan, Malaysia, Nepal, Poland, Russia, Saudi Arabia, Singapore etc. IIJS displayed the widest range

of gems and jewels under the categories of couture, loose diamond, plain gold jewellery, mass produced, allied,

machinery and international jewellery and loose diamonds.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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