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Rajesh Exports Equity Research

HomeCompanyRajesh Exports Equity Research

Date of Research – 20 January 2016

Price – Rs. 713.55

About the Company

Rajesh Exports Limited (“Rajesh Export” or the “Company”) was set up in the year 1990 as a manufacturer of gold & diamond jewellery. The Company exports its products worldwide and also distributes them within India to the wholesale jewellery market. Rajesh Export also retails its products through its own network of retail jewellery showrooms ‘Shubh Jewellers’ spread across India. As of April 1, 2013, the Company operated 81 Shubh Jewellers showrooms in India.

The Company operates a gold refining unit at Rudrapur, Uttarakhand which has a capacity of refining four hundred tonnes of gold per annum, and a state-of-the-art jewellery manufacturing unit at Whitefield, Bangalore. The output capacity of the Whitefield factory is two hundred and fifty tones of jewellery per annum which makes it one of the largest jewellery manufacturing facilities in the world.

The Company imports gold from Australia and South Africa. The Company’s exports accounts for 34 % of the total gold jewellery exports from India.

Key Financial Figures

Standalone (Rs. Cr)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Total Income from Operations 31,879.62 23,535.39 50,462.89 38,618.62  44,947.75 
Expenses 31,092.73 22,919.86 49,196.44 37,802.75  44,152.33  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit) 786.89 615.54 1,266.45 815.88  795.41  
Depreciation 2.06 2.09 62.22 1.86  1.85  
Finance Costs 296.78 340.81 478.27 307.97  351.08
Other income 0.16 0.64 0.11 4.01  43.67  
PBT 488.21 273.28 726.07 510.05  486.16  
Tax 35.10 44.14 71.13 33.54  22.55
PAT (before Minority Interest and share of Associates) 453.12 229.13 654.93 476.52  463.61  

Profitability Analysis

Standalone (%)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Operating Profit Margin Ratio 2.47 2.62 2.51 2.11  1.77
Net Profit Margin Ratio 1.42 0.97 1.30 1.23  1.03 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Share Capital 29.53 29.53 29.53 29.53 29.53 
Reserves & Surplus 1,959.09 2,385.04 2,712.97 3,332.12 4,753.69 
Net worth (shareholders funds) 1,988.62 2,414.57 2,742.49 3,361.64 4,783.21 
Long term borrowings 2,728.62 – 
Current liabilities 9,984.22 8,696.95 8,487.07 12,711.06 15,647.81 
Other long term liabilities and provisions 510.25
Total Liabilities 11,972.83 13,840.12 11,238.13 16,080.71 20,941.27 


Application of Funds / Assets (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Fixed Assets 71.13 69.77 168.84 264.13 1,348.79 
Noncurrent Investments 3.42 3.42 13.42 60.25 840.54 
Current assets 11,896.86 12,950.17 11,013.55 15,713.98 18,691.36 
Long term advances and other noncurrent assets 0.60 816.76 41.51 41.53 59.76 
Deferred Tax Assets 0.82 0.82 0.82 0.82 
Total assets 11,972.83 13,840.12 11,238.13 16,080.71 20,941.27 

Efficiency Analysis

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
ROCE 34.05 32.59 22.44 37.67 17.06 
ROE / RONW 20.47 18.77 8.35 19.48 9.96 

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

Particulars FY 2013 FY 2014 FY 2015 FY 2016  FY 2017
Total Income from Operations (Rs. Cr.) 31,879.62 23,535.39 50,462.89 38,618.62  44,947.75
Growth (%) 23.93 % (26.17 %) 114.41 % (23.47 %)  16.39 % 
PAT (Rs. Cr.) 453.12 229.13 654.93 476.52  463.61  
Growth (%) 11.29 % (49.43 %) 185.83 % (27.24 %)  (2.71 %) 
Earnings Per Share – Basic (Rs. ) 15.35 7.76 8.94 16.14  15.70 
Earning Per Share – Diluted (Rs. ) 15.35 7.76 8.94 16.14  15.70 
Price to Earnings 8.46 11.50 21.96 38.45  41.35 

Dividend History

The Company has maintained an average dividend yield of 0.59 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. Rajesh export’s average current ratio over the last 5 financial years has been 1.28 times which indicates that the Company has been maintaining sufficient cash to meet its short term obligations.

Long Term Debt to Equity Ratio

Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

Rajesh export’s average long term debt to equity ratio over the last 5 financial years has been 0.23 times which indicates that the Company operates with low level of debt and is placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

Rajesh export’s average interest coverage ratio over the last 5 financial years has been 2.49 times which indicates that the Company has been generating enough for the shareholders after servicing its debt obligations.

Ownership pattern

In its latest stock exchange filing dated 31 March 2017, Rajesh export reported a promoter holding of 53.94 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 20.09 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.


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