Technical Analysis

52-week blockbuster: Shree Ganesh Jewellery

| Updated on: Jun 25, 2011
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Having gone into a steep slide post its Initial Public Offer in March '10, the stock of gold manufacturer and retailer Shree Ganesh Jewellery House fell to valuations of as low as 3.2 times trailing twelve-month earnings.

However, over the past few months, low valuations coupled with consistent healthy revenue growth and the allure of gold helped the stock chart a recovery. Hitherto an export-focussed company, it stepped up thrust on the more promising domestic market by expansion of its retail chain.

In FY-11, the company expanded its retail chain by 13 stores, with plans to add a further 30 stores in FY-12. Its low debt-equity of 0.5 times was a further plus in light of funding this expansion.

Part of its issue proceeds was earmarked for opening of a gold refinery, the completion of which was recently announced by the company.

This 100-tonne plant is set to be operational by September, which could help expand the thin margins inherent to the gold business.

Shree Ganesh clocked steadily increasing revenue growth over the past four quarters, ending FY-11 with a massive 77 per cent growth. It further managed healthy volumes as well, with a 42 per cent volume growth in FY-11, even as gold prices stayed firmly on their path upward.

Rising raw material costs were offset by controls over other expenses to maintain operating margins at 6.5 per cent in FY-11.

Published on June 25, 2011

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