Scripscan:Thangamayil Jewellery Ltd
cmp:149
Code:533158
Story:The company currently trades in gold' silver' diamond and platinum jewellery.The ornaments are made to order as per specific requirement of the customer and the same are manufactured at the company's unit near Madurai. A portion of the jewellery is also bought readymade from various dealers in Andhra Pradesh' Gujarat' Kerala and West Bengal. The company is also in the business of jewellery exchange and has popularized the concept of hallmarking in the region.The topline of Thangamayil has experienced an impressive growth of more than 70% for the last five financial years when compounded annually. Net profit on the other hand has more than doubled every year in the period. While the cash profit demonstrated an equally impressive growth during the period' the cash flow from operating activities remained negative and has risen on an average by 66%.Inventories during the last five financial years have increased at a CAGR of over 50% which is much higher than that of other competitors like Rajesh Exports (32.5%) and Su-Raj Diamond & Jewellery (20%).Consequently' the inventory turnover ratio has declined in FY09 and stands at an unimpressive 5 against 54 and 10 for Rajesh and Su-Raj respectively.While negative cash flow and rising working capital requirement is not unknown phenomena for the industry' barring FY06' Thangamayil has failed to generate a positive cash flow.The present valuation looks attractive compared to the P/E ratio of established players like Su-Raj Diamond and Gitnjali Gems. However' given the cyclical nature of its business' the upside could be limited.
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