Thangamayil Jewellery - Q2 Result Update

Financial Results for Sept 30, 2013
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Thangamayil Jewellery sales, profit dive
Source: Business Line
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Extremely disappointing set of numbers from Thangamayil Jewellery. One thing is for sure, company cannot become a multibagger with such results, no matters whatever may be the situation in the country. The company has blamed the poor macro economic data, for the severe fall in revenues and net profit. The only hope now, is the ongoing festive season, which will take gold to higher levels and that might help the jewellery companies post good set of numbers in next quarter.

The company reported revenues of 240.75 Cr from 373.09 Cr last year.
Net profit stood at 0.6 Cr from 12.54 Cr last year.
EPS has declined to 0.44 from 9.15 last year, which sums up the horrible set of numbers.

The company said the fall in profit in the Q2 of this year was due to the “steep decline in topline caused by adverse macro economic factors faced by the industry”.

Earlier, in an interview, the management said that in spite of some poor scenario, we should be able to make 1500-1600 Cr revenues this year. But with such results, I seriously doubt if that is possible, unless we have a spectacular Q3.

My Views:
It is important that we wait for other Jewellery stocks to come out with numbers, and then compare the performances, as that will give us a better idea, on what impact did hiking the import duty on Gold had on jewellery companies actually.
But in current scenario, with government trying to reduce the Gold Import through newer and newer policy time and again, it will be very very difficult for jewellery companies to make a strong comeback. As I pointed out earlier, the only hope left is the performance in this quarter, with increasing demand for Gold and Silver, on account of festive season. Gold has already appreciated to 31k, with Diwali coming closer, and this time, the rise is just because of rising demand, unlike 3-4 months back, where it was mainly due to rupee devaluation. The Rs has stayed flat against dollar in last 2-3 weeks, but still prices of gold has appreciated from 28.5k to 31.3k as of today.
For now, I dont consider this as a multibagger candidate, and would only hope that it gives a decent returns in times to come, of course not in short term. We should wait for some more clarity from management on what went wrong in this quarter, and what they are expecting out of next quarter.