Before I talk about the recent Financial performance numbers of Gitanjali Gems Ltd, I would like to show you two of it's stock price charts:
One showing Gitanjali's stock price movement over the last 5 years and the other showing the movement over the last 1 year. The chart alongside is the 5-years chart. First we can see that Gitanjali's stock price shot up from just under Rs.300 before the end of June'2012 to over Rs.600 by the start of March'13. After spending a few months around that level, Gitanjali's stock saw massive selling and non-stop Lower Circuits for over a month, which resulted in the stock losing around 90% of it's value. If I remember correctly, the reason being said was that some broker was involved in price-rigging of the stock earlier. The price did attempt a mild recovery, when the price did hit 3-digits a few months later, but it was shortlived as the company's business was affected due to Govt's Gold-import restrictions in 2014-15.
This chart here is the last 1-year's chart. After spending most of it's time in the Rs.35 to 45 range, the company's stock is finally attempting a break-out, post announcement of Q1-FY'17 results. In order to analyse if this break-out is sustainable or not and if it has any legs, we need to check the company's recent financial performance very closely.
I have prepared charts representing Trailing-Twelve-Months figures for Gitanjali Gems Ltd.'s Total Income, EBITDA, Interest Cost and Interest/EBITDA %, from the period ending June'13 to the period ending June'16. This will help us understand the company's performance trajectory over the last 3 years. Have a look at the following Trailing-Twelve-Month charts:
As we can see, Gitanjali Gems Ltd's Consolidated T-T-M Total Income was on a sharp downswing between June'13 to Sept'14. But in the seven quarterly results since Dec'14 quarter, Gitanjali Gems Ltd. has managed to post a Y-o-Y Growth of over 24% in six of those quarters. This splendid recovery in business volumes has helped the company bring back it's T-T-M Total Income figure very close to the Rs.15,000 crores mark and looks like it will be attempting to hit an all time high in the coming 2-3 quarters.
Surprisingly though, Gitanjali's EBITDA has not kept pace with increase in it's Total Income. From the charts we can see that the company's T-T-M EBITDA peaked out during the March'15 quarter, then remained stable for a couple of more quarters, and then dropped suddenly during Dec'15 quarter and has continued to slide to a smaller extent till June'16. Most probably the volatility in Gitanjali's EBITDA has something to do with the sharp drop in Gold prices during 2015. Now that international Gold prices have recovered about 20% from the lows hit last year, the EBITDA margin of the company seems to be coming back to normal levels. Historically, Gitanjali Gems Ltd. has enjoyed EBITDA margins in the range of 5-6%. For the T-T-M period ended June'16, the company's EBITDA margin stands at 5.9%. Hence it is certainly back to normal range now. Hopefully the EBITDA will stop sliding now and move in tandem with the company's Total Income growth. Let's keep an eye on that.
During the period when the Govt had put restrictions on Gold imports, Gitanjali Gems faced a crisis-like situation with it's Debt burden, including client payments and working capital requirements. This had led to Gitanjali Gems' T-T-M Interest cost shoot up from lows of around Rs.400 crores in June'13 to highs of around Rs.900 crores by Dec'14. But the company's promoter/management certainly deserves some praise in the way they handled the situation and have now come out of it with improving financial profile of the company. As we can see, the T-T-M Interest Cost is already on a decline over the last 3 quarters. I am expecting the T-T-M Interest Cost figure drop to & then stabilise around the Rs.500 crores mark over the next few quarters. On a T-T-M basis, Gitanjali's Interest Cost as a percentage of it's EBITDA is now at around 75%, which is the lowest level in the last 10 quarters. This is now helping the company post stronger Net Profit numbers. Going forward we can expect this figure to drop further to around 60% level.
At a time when the company's share price was ruling below Rs.40 levels over the last 12-18 months, the company's promoters and few other investors infused more funds into the company via Convertible warrants at a price of close to Rs.63 per share. On one hand this Equity infusion into the company gave confidence to the Bankers, on the other hand these investors got to increase their stake in the company at a reasonably attractive valuations, especially considering the longer terms fundamentals of the company. The company's Equity Capital has already expanded from about Rs.98 crores to about Rs.108 crores over the last 3 quarters, and is set to expand to around Rs.119 crores soon. Even considering the expanded Equity Capital, Gitanjali Gems Ltd currently commands a Market Cap of just about Rs.700 crores at the current price of around Rs.60 per share. At this level, it is available at just about 3.5 times Gitanjali's T-T-M Cash Profit and at less than 2 times 1-year forward Cash Profit of the company. I think it does make a strong case for Investors to consider having a small exposure to Gitanjali Gems with a 1-3 years view.
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I have prepared charts representing Trailing-Twelve-Months figures for Gitanjali Gems Ltd.'s Total Income, EBITDA, Interest Cost and Interest/EBITDA %, from the period ending June'13 to the period ending June'16. This will help us understand the company's performance trajectory over the last 3 years. Have a look at the following Trailing-Twelve-Month charts:
As we can see, Gitanjali Gems Ltd's Consolidated T-T-M Total Income was on a sharp downswing between June'13 to Sept'14. But in the seven quarterly results since Dec'14 quarter, Gitanjali Gems Ltd. has managed to post a Y-o-Y Growth of over 24% in six of those quarters. This splendid recovery in business volumes has helped the company bring back it's T-T-M Total Income figure very close to the Rs.15,000 crores mark and looks like it will be attempting to hit an all time high in the coming 2-3 quarters.
Surprisingly though, Gitanjali's EBITDA has not kept pace with increase in it's Total Income. From the charts we can see that the company's T-T-M EBITDA peaked out during the March'15 quarter, then remained stable for a couple of more quarters, and then dropped suddenly during Dec'15 quarter and has continued to slide to a smaller extent till June'16. Most probably the volatility in Gitanjali's EBITDA has something to do with the sharp drop in Gold prices during 2015. Now that international Gold prices have recovered about 20% from the lows hit last year, the EBITDA margin of the company seems to be coming back to normal levels. Historically, Gitanjali Gems Ltd. has enjoyed EBITDA margins in the range of 5-6%. For the T-T-M period ended June'16, the company's EBITDA margin stands at 5.9%. Hence it is certainly back to normal range now. Hopefully the EBITDA will stop sliding now and move in tandem with the company's Total Income growth. Let's keep an eye on that.
During the period when the Govt had put restrictions on Gold imports, Gitanjali Gems faced a crisis-like situation with it's Debt burden, including client payments and working capital requirements. This had led to Gitanjali Gems' T-T-M Interest cost shoot up from lows of around Rs.400 crores in June'13 to highs of around Rs.900 crores by Dec'14. But the company's promoter/management certainly deserves some praise in the way they handled the situation and have now come out of it with improving financial profile of the company. As we can see, the T-T-M Interest Cost is already on a decline over the last 3 quarters. I am expecting the T-T-M Interest Cost figure drop to & then stabilise around the Rs.500 crores mark over the next few quarters. On a T-T-M basis, Gitanjali's Interest Cost as a percentage of it's EBITDA is now at around 75%, which is the lowest level in the last 10 quarters. This is now helping the company post stronger Net Profit numbers. Going forward we can expect this figure to drop further to around 60% level.
At a time when the company's share price was ruling below Rs.40 levels over the last 12-18 months, the company's promoters and few other investors infused more funds into the company via Convertible warrants at a price of close to Rs.63 per share. On one hand this Equity infusion into the company gave confidence to the Bankers, on the other hand these investors got to increase their stake in the company at a reasonably attractive valuations, especially considering the longer terms fundamentals of the company. The company's Equity Capital has already expanded from about Rs.98 crores to about Rs.108 crores over the last 3 quarters, and is set to expand to around Rs.119 crores soon. Even considering the expanded Equity Capital, Gitanjali Gems Ltd currently commands a Market Cap of just about Rs.700 crores at the current price of around Rs.60 per share. At this level, it is available at just about 3.5 times Gitanjali's T-T-M Cash Profit and at less than 2 times 1-year forward Cash Profit of the company. I think it does make a strong case for Investors to consider having a small exposure to Gitanjali Gems with a 1-3 years view.
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