Suraj Diamond Jewellery Limited INDIA
SELL
Industry Diamond / Jewellery
52Wk High/Low Rs.77.90 / 39
Equity Rs.39.99 crores
CMP (Face Value) Rs.47.55 (10)
Market Cap. Rs.190 crores
Book Value Rs.122.1
Last Dividend
15% Div. Yield 3.15%
PE
5.11 Industry PE 21
Report sent to subscribers on 20th November 2006
There has been a decent run-up in Diamond and Jewellery sector stocks in the past 1
year. But the market seems to have ignored Su-raj Diamond & Jewellery Limited. While
most other stocks have doubled, after touching a high of Rs.77.90 on 25th January
2006, Su-raj Diamond currently quotes at Rs.47.55 on BSE (dated 17.11.2006), a fall of
over 39%.
However, a look at its comparison with similar size Companies in Diamond and
Jewellery Sector forces one to wonder why it has seen a fall instead of following the
market trend despite having the best fundamentals. Look below for Comparison:
Particulars Asian Star
Company
Classic
Diamonds
Gitanjali
Gems
Shrenuj
& Co
Su-raj
Diamond
Suashish
Diamond*
Face Value (Rs.) 10 10 10 2 10 10
Equity Capital (Crore Rs.) 10.7 7 59 10.9 40 20.8
Book Value (Rs.) 225.5 224.3 100 23.3 122.1 218.5
Sales (Crore Rs.) 1206.7 627.2 1621.2 556.5 1219.9 805.7
NP (Crore Rs.) 27.8 15.8 47.8 17.6 37.4 28.2
Div. % 20% 20% 10% 35% 15% 15%
Div. (Rs.) 2.0 2.0 1.0 0.7 1.5 1.5
EPS (Rs.) 26.1 22.6 8.1 3.2 9.3 13.6
Price (Rs.) 1286 461.9 215 51.05 50.15 140
PE Ratio 49.27 20.44 26.54 15.95 5.11 10.29
PBV 5.70 2.06 2.15 2.19 0.39 0.64
CAGR Sales % 11% 1% NA 24% 28% 39%
CAGR PAT % 6% -9% NA 42% 47% 56%
Div. Yield % 0.16% 0.43% 0.47% 1.37% 3.15% 1.07%
* CAGR over 2 years
Valuechase
Su-raj Diamond November 17, 2006
2
Su-raj’s Sales and PAT have grown at a CAGR of 28% and 47% over last 3 years and it
offers a dividend yield of 3%. Only Suashish diamond and Shrenuj & Co. have achieved
a similar growth. However, when compared to them, Su-raj is quoting at a PE of
Rs.5.11 as compared to PE of 10.29 and 15.95 for Suashish Diamonds and Shrenuj &
Co. Even while looking at Price to Book Value Ratio, Su-raj’s PBV is far below Suashish
Diamonds.
Therefore, Su-raj Diamond is both a Value cum Growth play at its Current price. Its
current price neither factors in the growth achieved by it over the years nor does it
factor the discount to Book Value.
While we tried to look for reasons for Su-raj to have a lower PE valuation, we found
that it has a very high level of Debtors. As on 31.3.2006, its Debtors were at Rs.793
crores reflecting Debtors turnover ratio of 1.78 times and average collection period of
210 days. In fact the Debtors have gone up from Rs.594 crores as on 31.3.2005 to
Rs.793 crores as on 31.3.2006 indicating that its growth is being achieved by pushing
the stocks on Credit.
However, we think that there is nothing much to worry once one looks at the following
table:
Particulars 31.3.2006
Rs. in Crores
31.3.2005
Rs. in Crores
Change
Rs. in Crores
Remarks
Debtors over 6 months 97 87 +10 Maintained at similar level
Other Debts 696 507 +189 Increase facilitated through
increase in Sundry Creditors
Total Debtors 793 594 +199
Sundry Creditors 409 237 +172
Loan Funds 227 221 +6 Hardly any increase
(a) Su-raj has generally maintained a high level of Debtors. Even in year 2003-04, its
debtors were Rs.486 crores.
(b) Further, we believe that the promoters are well experienced in this business to manage
the debtors.
(c) In any case, discount of Current Market Price to Book Value (60%) leaves sufficient
scope to take care of any bad debts.
Even if, one ignores Debtors, Creditors and Secured Loans for a moment, the Company
has the following assets, for which the Company will get full value in any cases:
Particulars 31.3.2006
Rs. in Crores
Remarks
Fixed Assets 59 Depreciated facilities will be able to fetch at least the Book Value
Inventories 189 Full value realizable since easily Gold and Diamonds are
considered to be as good as cash.
Cash and Bank Balances 108
Total 356
Value per share (Rs.) 89
