Edelweiss has issued a buy call on one of the leading jewellery companies, for a potential upside of 60 percent.
With a market cap of Rs. 2,642.6 crore, the shares of Sky Gold Limited have delivered multibagger returns of around 646.7 percent in one year, while around 100.3 percent returns year-to-date.
Brokerage Target
Edelweiss, one of India’s leading brokerage firms, has given a ‘buy’ recommendation on Sky Gold Limited with a target price of Rs. 3,204, representing a potential upside of nearly 60 percent from the current trading price of Rs. 1,996.35.
The brokerage expects robust growth for Sky Gold Limited, expecting revenue, EBITDA, and profit after tax (PAT) to increase by 53 percent, 56 percent, and 67 percent respectively from FY24 to FY27.
Brokerage Outlook
Sky Gold has completed the acquisition of Sparkling Chains Pvt. Ltd. and Starmangalsutra Pvt. Ltd. for Rs. 26 crore and Rs. 24 crore respectively.
Further, Sky Gold will issue 4,17,542 shares to the shareholders of Sparkling Chains Pvt. Ltd. and Starmangalsutra Pvt. Ltd. on a preferential basis.
According to Edelweiss, these strategic acquisitions will help to significantly expand Sky Gold’s footprint in the gold jewellery sector and diversify its product portfolio. The acquisitions have substantially increased Sky Gold’s addressable market share from 35 percent to 70 percent.
Following these acquisitions, the company’s management has revised its guidance for FY26-27, now targeting sales of Rs. 6,300 crore with a projected return on capital employed (RoCE) of over 25 percent. Edelweiss views these targets as achievable with minimal risk.
The brokerage considers the acquisitions as a positive move, expecting the new entities to accelerate growth going forward. Moreover, Edelweiss anticipates that the shift from the unorganised to organised segment and growth in exports will further drive volumes.
Company’s Management Guidance:
Currently, Sky Gold derives approximately 65 percent of its accrues from corporates and 35 percent from distributors. Over the next three years, the management intends to shift entirely to corporate business, aiming for a 100 percent corporate business model.
Exports currently contribute 6 percent to Sky Gold’s overall revenue, with exports expected to increase to 9-10 percent by FY24-25.
To enhance its market share, Sky Gold plans to expand its corporate client base, which currently includes 15 out of the top 20 corporate jewellery businesses.
Also read
In the past five years, Sky Gold focused on expanding its customer base. Moving forward, the company aims to increase margins through value-added products, and it focuses on maintaining a high inventory churn rate and reducing debtor days.
Due to rapid business expansion, Sky Gold has experienced negative cash flow from operations. However, it anticipates a turnaround to positive operating cash flow once it achieves Rs. 5,000 crore in revenue.
To support its growth objectives, Sky Gold is focusing on effective working capital management. It is also investing in machinery to reduce labour costs and enhance production efficiency. The company maintains a consistent annual capital expenditure (capex) of Rs. 1–1.5 crore specifically for high-tech equipment.
Financials:
Financially, the company experienced significant growth in its revenue from operations, showing a year-on-year rise of 90 percent from Rs. 270 crore in Q4 FY22-23 to Rs. 513.4 crore in Q4 FY23-24.
Similarly, its net profit increased during the same period from Rs. 6.08 crore to Rs. 13.6 crore, indicating a growth of 123.7 percent YoY.
Shareholding Pattern:
According to the latest shareholding pattern, the Promoters hold a 61.32 percent stake in the company, Foreign Institutional Investors (FII) hold a 0.04 percent stake, while Retail Investors hold a 38.64 percent stake in Sky Gold.
As of March 2024, the ace investor Ashish Kacholia owns nearly 4.04 lakh equity shares, representing a 3.05 percent stake, in the company.
About the company:
Incorporated in 2008, Sky Gold Limited is engaged in the business of importers, exporters, manufacturers, buyers, sellers, dealers, distributors, wholesalers, assembles, designers, cutters, polishers, and labour jobs in all kinds of gold and silver Jewellery.
It mainly deals in 22 Karat gold jewellery offering a wide variety of designs, and provides an extensive range of designs and uses studded American diamonds and/or coloured stones in many of their jewellery products.
Written by Shivani Singh
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
