Multibagger Smallcap Gems & Jewellery Stock At Rs 1,300, Attractive To Buy; Massive 48% Potential Rise Seen

There is a potential for fetching massive double-digit gains in a smallcap gems & jewellery stock. It is none other than Thangamayil Jewellery Ltd. Although, Thangamayil's year-to-date performance has been broadly bearish, but its a multibagger with the upside of 157% in a year. The latest volatility in Thangamayil brings a buy-on-dips opportunity.

On Thursday, Thangamayil share price traded at Rs 1,308.35 apiece on BSE, marginally down with a market cap of Rs 3,590.00 crore. The stock's 52-week high and low are of Rs 1,544.95 and Rs 487.80 apiece respectively.

From its 52-week low, Thangamayil shares are up by at least 168%.

In its research note recently, Equirus Securities said, We expect TJL to deliver a ~27%/31%/39%revenue/EBITDA/PAT CAGR over FY23-FY26E on steady volume growth led by SSSG and aggressive network expansion (incl. its flagship T. Nagar store in Chennai). Adequate balance-sheet strength to fuel the
expansion would shore up return ratios; we expect RoE/RoCE to expand ~1,000bps/270bps over FY23E to 33%/17% in FY26E."

Further, it said, "Initiate coverage with LONG and a Mar'25 TP of Rs 1,935 set at 25x Mar'25 one-year forward EPS, implying a ~43% upside from current levels."

Equirus highlighted four key reasons why buy this gems and jewellery stock. They are:

Dominating Tamil Nadu's retail jewellery landscape:

In South India, which forms ~40% of India's total jewellery market, Tamil Nadu holds a dominant ~25% share. TJL, a recognized jewellery brand, with c.3% market share, is well-known for its designs and retail chain network (56 stores), majorly spread across tier II and III cities of the state. This strategic presence helps it tap rural income/investments typically parked in gold for wedding/investment needs, leading to sustained volume growth.

Macro tailwinds continue to favour organised players:

With gold being prone to smuggling and considered as an easy medium to park black money, the government has maintained a laser-sharp focus on tracing each piece of gold to its seller through hallmarking. This has also ensured the purity of gold, protecting gullible buyers. With the third phase of hallmarking coverage already implemented, most of Tamil Nadu has been brought under the mandatory hallmarking ambit. This would further boost the shift from unorganised to organised players, with TJL emerging as one of the key beneficiaries.

Strong area addition, sustained SG - key growth drivers:

After a long pause in-store additions over FY15-FY19 amid regulatory headwinds and debt issues, TJL embarked on an expansion drive in FY20. However, this was again halted by GST, demonetisation, and COVID. With all disruptions behind and strong SSSG now achieved (FY23: ~25%+), TJL should add about six stores in FY24E; followed by the much-awaited flagship T. Nagar store and subsequent smaller format stores addition in Chennai city.

Balance sheet strength, and return ratios supportive of expansion:

Unlike in the past, TJL currently has a sound balance sheet (net D/E: 1.9x) with solid return ratios (RoE: 22%). This would support the company's proposed expansion drive.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.