PC Jeweller receives 3/5 fundamental grade by CRISIL

Renowned Indian jewellery retailer - PC Jeweller Ltd (PCJ) has been assigned a CRISIL IER fundamental grade of 3/5 by CRISIL Research. The grade indicates that the company’s fundamentals are ‘good’ relative to other listed equity securities in India. CRISIL Research has assigned a valuation grade of 5/5, indicating that market price has ‘strong upside’ from the current levels.

The retailer is recognised to have a strong foothold in NCR (National Capital Region) and a repute in an industry with an affinity for gold jewellery. Brand recall, successful branch expansion (from one to 36 showrooms in Q1FY14) and demand for gold jewellery in India despite the volatility in gold prices have increased PCJ’s top line (three-year CAGR of 59 percent) according to CRISIL. Compared with other gold jewellery players, PCJ’s revenue mix leans towards higher-margin diamond jewellery (31 percent of FY13 sales); which CRISIL believes would this should help PCJ to maintain margins at 10-11%. The grade has also taken into account the expected increase in organised retail penetration in jewellery vis-a-vis the single store format, which will benefit players such as PCJ.

PCJ plans to add 20 more showrooms or 100k sq ft to its retail footprint in FY14 across India, and is looking at new markets in southern and western India. Albeit the expansion according to CRISIL carries the risk of competition, pressure on profitability due to higher marketing expenses and working capital requirements and a cautious optimism towards the growth of gold jewellery as the India government’s restrictions on gold imports are adding to industry woes.

CRISIL Research expects revenues to grow by 23 percent to Rs.49.4 bn in FY14 at PCJ.