Wednesday, April 6, 2011

Stock Idea: Su-Raj Diamonds

Ashish Chugh, Investment Analyst & Author of Hidden Gems is of the view that Su-Raj Diamonds looks good at the current level.
Chugh told CNBC-TV18, “There are a couple of reasons why Su-Raj Diamonds looks good at the current level. First is that if you see the financials of the company, there has been an improvement quarter-on-quarter (QoQ) in the both sales and profitability of the company. Second is the promoters of Su-Raj Diamonds took warrants at Rs 70 about six months back, the stock currently trades at about Rs 50-51. The third reason is that the promoters have been acquiring the stock through open market purchases in the month of March 2011 alone they have increased their stake by about 3% and I think the short-term trigger for the stock is that in the past 3-4 months, the diamond prices have seen a sharp upsurge. We all know about the increase in gold prices but the fact that diamond prices have gone up is a lesser known fact to most individuals and that is probably the reason that stocks like Su-Raj Diamonds have not reacted to this information. To give you a background, this is a company, which is into manufacture and export of polished diamond and also diamond studded jewellery.”
He further added, “This company in the past nine years has grown its revenues from about 500 crore to approximately 3,800 crore expected for FY11. Profits have increased from 9 crore to expected profit of about Rs 110 crore for FY11. For first nine months of the current financial year sales are about 2,700 crore, which is up by about 25% over the same period last year, PAT is about 78 crore, which is again up by more than 100% over the same period last year. Full year sales is expected to be about 3,800 crore with a profit after tax of about 110 crore, which results in an EPS of about Rs 16-17. So at the current price of about Rs 51, the stock is trading at a P/E multiple of just about 3. Diamond prices have gone up by about 30-40% in the past three-four months and the trend is still continuing. So I believe that the numbers for March quarter and June quarter could be very good. Infact March could be a quarter when the company makes its highest ever sales and profits for any quarter in the history of the company. So company having a sale of 3,800 crore and profit after tax of about 110 crore is available at a marketcap of just about 350 crore. Again the downside looks extremely restricted and I believe that as the numbers for March and June start pouring in, I think the stock can witness a rerating.
Source: Internet ( by Ashish Chug)

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