PC Jeweller is one of India's larger Jewellers with prominent presence in North & Central India. The company has nearly 90 Showrooms across several cities, nearly 75 of them are company owned and the rest as Franchise stores. Apart from it's domestic business, PC Jeweller also exports it's products to a few countries Dubai and some neighboring places. Earlier nearly 30% of the company's Turnover came from Exports, but from this fiscal the company is curtailing it's Export business due to sudden sharp increase in Cost of Capital and long Credit cycles in Export business. The company has now decided to focus on Domestic business and expand via Franchise stores and use technology platforms to push increased sales.
The year 2018 was really bad for PC Jeweller in terms of it's share price movement & associated rumour mongering. Hence
I think it is fit enough to compare the company's actual Financial Performance with it's share price movement over the recent few years, to get a good idea of what could the future quarters unfold. I have considered Trailing-Twelve-Months numbers at the end of every quarter for this analysis. FY'2017-18 was an excellent one for PC Jeweller in terms of business growth as well as share price movement. The company credited it to the implementation of GST, which helped organised Jewellers to increase their market share at the expense of the unorganised market.
In comparison, FY'2018-19 has been a lacklustre year, primarily because the company had to change it's strategy and sharply curtail it's Export business due to sudden increase in Finance Cost. Also, the company's name got involved with Vakrangee and this lead to a sharp fall it's market valuation. This further lead to Banks tightening their stance towards their exposure to PC Jeweller. Hence during this fiscal, PC Jeweller had to focus on maximising cash flows from existing assets and use it to repay Bank Debts to bring down the same to comfortable levels. Hence the business expansion plans took a back seat this year. Over the last 2-3 quarters, PC Jeweller has done well to reduce it's Debt by over Rs.1000 crores, i.e. a reduction of about 25%. In a couple of quarters, the company will be able to refocus on expanding it's business.
Despite these adverse circumstances, PC Jeweller has not seen a sharp drop in it's Total Income & Net Profit numbers. It's T-T-M Total Income & Net Profit numbers are down by just about 15% from the peak levels it hit in June'18. PC Jeweller's T-T-M EPS still stands at a very
respectable level of over Rs.12/-. Now have a look at the share price chart alongside. The price was around Rs.200 level at the start of year 2017. It rallied all the way to nearly Rs.600 levels by January'2018, after which it soon got involved in rumours of it's association with Vakrangee. Within 6 to 7 months, the share price was in 2-digits and since then it has not yet managed to get back to triple digit figures.
My opinion is that PC Jeweller currently deserves a price of about Rs.150 per share, if not more. The company is likely to start posting some growth in it's Quarterly numbers after June'19, i.e. from Q2-FY'20 onwards. Depending on how much growth the company is able to report from that point, the price target could be scaled up. But as of now it certainly deserves a price of around Rs.150 per share and it is trading at around Rs.66 currently, which is an undervaluation by a big margin.
The year 2018 was really bad for PC Jeweller in terms of it's share price movement & associated rumour mongering. Hence
In comparison, FY'2018-19 has been a lacklustre year, primarily because the company had to change it's strategy and sharply curtail it's Export business due to sudden increase in Finance Cost. Also, the company's name got involved with Vakrangee and this lead to a sharp fall it's market valuation. This further lead to Banks tightening their stance towards their exposure to PC Jeweller. Hence during this fiscal, PC Jeweller had to focus on maximising cash flows from existing assets and use it to repay Bank Debts to bring down the same to comfortable levels. Hence the business expansion plans took a back seat this year. Over the last 2-3 quarters, PC Jeweller has done well to reduce it's Debt by over Rs.1000 crores, i.e. a reduction of about 25%. In a couple of quarters, the company will be able to refocus on expanding it's business.
Despite these adverse circumstances, PC Jeweller has not seen a sharp drop in it's Total Income & Net Profit numbers. It's T-T-M Total Income & Net Profit numbers are down by just about 15% from the peak levels it hit in June'18. PC Jeweller's T-T-M EPS still stands at a very
My opinion is that PC Jeweller currently deserves a price of about Rs.150 per share, if not more. The company is likely to start posting some growth in it's Quarterly numbers after June'19, i.e. from Q2-FY'20 onwards. Depending on how much growth the company is able to report from that point, the price target could be scaled up. But as of now it certainly deserves a price of around Rs.150 per share and it is trading at around Rs.66 currently, which is an undervaluation by a big margin.
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