Relatively lower gold prices and pick up in demand boosted net sales, but it wasn’t enough for Thangamayil Jewellery to stem the steady decline in operating profit
Thangamayil Jewellery saw its net sales rise 19% year-on-year (y-o-y) during the first quarter, helped by relatively lower gold prices and pick up in demand ahead of the wedding season. Net sales for the quarter ended 30 June 2013 stood at Rs425.16 crore compared to Rs358.41 crore for the corresponding period last year. Despite pick up in revenues, the company saw its Q1 net profit drop 9.12% y-o-y, to Rs13.75 crore. This is still better compared with a loss incurred in March quarter.
According to data collected by Moneylife, the company has been posting consistent sales growth quarter after quarter. Its net sales for the quarter grew by 19% which is lower than its three-quarter y-o-y growth average of 25%. Yet, we are concerned about its operating profit and net profit, which has shown a downward bias over the last three quarters. The average three-quarter operating profit growth rate is an abysmal -44% while operating profit for the June quarter fell 11%. Its market capitalisation is quoting at 2.47 times its operating profit, which is on the cheaper end. Its return on capital employed stood at 17%.
During the quarter, Thangamayil Jewellery opened its 30th and 31st branch, at Eral and Villupuram, on 10th July. The total area of both the branches collectively totalled 2555 square feet.
As of June 2013, the promoters hold 69.04% stake of the company while foreign institution investors (FIIs) hold 1.26% of the shares outstanding. The general public holds 29.24% of the shares outstanding.
On Tuesday, Thangamayil Jewellery dipped 4.62% to Rs190 on Bombay Stock Exchange (BSE) while the benchmark Sensex closed up 143 points up to end the day at 20,302.
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