Radhika Jeweltech Limited (RJL) is a retail jeweller specialising in gold and diamond furnished jewellery with a retail outlet in Rajkot, Gujarat, in western India. The company's shares jumped from Rs 15.30 to Rs 178 on the NSE in a year, representing a multibagger return of 1,065.03 per cent. Year-to-date (YTD), the stock has risen 34.94 per cent, and in the previous six months, it has risen 107.39 per cent. Khambatta Securities has issued a buy recommendation on the stock, with a target price of Rs 303, implying a potential upside of 70% from the current market price of Rs 178.
Key investment rationale for Radhika Jeweltech Limited (RJL)
As per the brokerage "RJL outsources the making of jewelleries from specialist manufacturers while the company focuses exclusively on sales. RJL has established strong relationships with manufacturers that exclusively design and manufacture jewellery pieces for the company, thereby allowing RJL to focus on its core operational strength of sales."
"The most important growth driver for RJL in the near-to-medium term is 10,000 sqft new showroom, expected to launch by 2Q FY23. Located in the city's upmarket Kalawad Road neighbourhood, the new store will increase the company's total retail space to 5x its current area and leapfrog RJL's revenues to a significantly higher trajectory. Instantaneous inventory replenishment and settlement of trade with the manufacturer through physical gold act as a natural hedge against gold price swings," said the brokerage.
Buy for a target price of Rs 303
The brokerage has claimed that "At 10.0x FY24E EPS, we initiate RJL with a BUY based on a price target of Rs 303 and an upside potential of 71%. RJL's sales in 9M FY22 more than doubled on a y-o-y basis on the back of a robust revival in demand with progressive improvement after a weak start to the financial year. With FY21 and 1Q FY22 witnessing a demand slump due to Covid outbreaks and ensuing lockdowns, 2Q FY22 and 3Q FY22 came around stronger as Covid cases and related restrictions abated, and as economic activity gained traction. We expect full year revenues to almost double up in FY22."
Khambatta Securities has said that "Going forward, the primary driver of RJL's growth will be the expansion of its operations with the opening of a second store 4x the current retail space. We have modelled a gradual pick up of sales from the new showroom through FY24. RJL has low debt levels of approximately Rs 24 crore, which is a gold loan the company has raised from the promoters and attracts a very low 2% rate of interest. The RJL stock currently trades at an attractive forward P/E of 5.8x FY24E EPS. Assigning a target multiple of 10.0x FY24E EPS, our valuation generates a price target of Rs 303, informing an upside potential of 71%, as we initiate coverage on RJL with a BUY rating."
The stock has been picked from the brokerage report of Khambatta Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.