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Monday, December 13, 2010

Gitanjali Gems Ltd:-Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Gitanjali Gems Ltd
Cmp:180
Target:252
Percentage return:40%
Duration:7 months

Story:Five points to qualify Gitanjali as a great medium to long term buy.

1)Gitanjali Gems (GGL) is an integrated diamond and jewellery manufacturer and its operations include sourcing, cutting and polishing roughs into diamonds and the crafting of diamond and other jewellery.The jewellery segment accounted for 54 per cent of consolidated sales in FY-10, up from the 50 per cent in FY-09. Facilities to source and polish diamonds will serve to maintain operating efficiency, while focus on higher-value diamond jewellery will offer it better margins than gold jewellery.

2)Gitanjali has a wide range of established brands like Nakshatra, Gili, Asmi, Sangini, Giantti in the domestic branded jewellery market. It also has a joint venture with UAE-based retailer Damas to sell jewellery in India under D’damas brand.The company sources diamonds from Diamond Trading Company (DTC), the rough diamond sales and distribution arm of the De Beers Family of companies.The company also is trying to push its lifestyle business with its subsidiary Gitanjali Lifestyle, which has several outlets. It has entered into a 50:50 JV with Italian group Morellato and Sector for distributing the latter’s jewellery and watch brands such as Cavalli, Galliano Moschino and Miss Sixty.

3)The domestic branded jewellery business appears very promising for the company at this juncture; a focus on premium jewellery leaves it less susceptible to cutbacks on spending by the mid-lower income groups.Through the lifestyle business, the company retails watches, silver wear, cosmetics, perfumes, leather and accessories. Gitanjali’s SEZ initiative has not begun to contribute to revenues as yet.Besides some in-principle approvals, it has one notified 80-hectare gems and jewellery SEZ at Hyderabad.In another initiative, Gitanjali recently entered into a joint venture agreement with the Kuwait-based Hassan’s Optician Company to secure a foothold in the eyewear segment.

4)Gitanjali has increasingly undertaken retail expansion through the organic, inorganic and partnership routes. The retail space has increased to 1 million sq ft by end of FY10 from 65,000 sq ft a year ago. The company has over 3000 Point of sales (POS) by end of FY10. Of India’s entire organized mall space belonging to the jewellery category, Gitanjali occupies nearly 60%. It has aggressive retail expansion plans. Gitanjali expects to increase its retail presence to 2 million square feet, primarily in the domestic outlets in the next three years.All this features helps one to get that extra comfort in the stock.

5)Growth prospects hinge on exploiting the relatively untapped domestic branded jewellery market, besides facing a lower degree of competition in this space.Gitanjali's broad product range, strong brand equity and significant retail presence along with sight holder status and strong network have enabled it a strong hold in domestic and international markets. With a wider product range and potential to tap the premium end of the market through tie-ups with international retailers, Gitanjali is likely to make larger strides in the domestic retail space. The stock holds good potential for appreciation in the next six months.At present prices its quoting at less than 5 times its forward earnings.A great buy at present levels.

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