Brief Company Introduction
Incorporated in 1986, Goldiam International Ltd is engaged in the business of manufacturing and exporting gold and diamond jewelry to global retailers.The Co is a supplier of Natural diamond jewellery and Lab grown diamonds (LGD) and jewellery to global retailers, departmental stores and wholesalers. Its products include Engagement Rings, Wedding Bands, Anniversary Rings, Bridal Sets, Earrings and Pendants.
Financial Highlights & Results
- The company had a poor quarter with revenue reducing by 15% while PAT fell by 29%.
- EBITDA margins reduced from 21.3% to 16.7%.
- The company has proposed a buyback of ₹326.92 mn., which is up to 2% of the equity of the company.
- The company has an order book size of ₹ 1,000 mn & This order book is expected to be executed in the next four-six months
Investor Conference Call Highlights
- The company saw a decrease in sales in USA owing to recessionary conditions.
- The share of lab-grown jewelry in the overall mix stands at 23% in FY23.
- The management explained that although the economic situation in the USA hasn’t completely stabilized, some green shoots are visible.
- The value for one unit of lab-grown diamond jewelry for last year was about $1,100 and for natural diamonds, it was $530 per piece.
- The management explains that people are preferring to buy lab-grown diamond jewelry right now because the natural diamond price of the jewelry for the same styling is 10 times higher priced.
- The company’s mantra for gaining a competitive advantage in the highly competitive lab grown space is to focus on the distribution end by internally consuming the LGD produced & then selling directly to the retailers in USA instead of wholesalers.
- The management when asked about its strategy for entering the India market stated “The interesting thing about lab-grown is that we’ll be using solitaire in our presentation to the Indian consumers. Because of the cost of solitaire with our fully backward integration, we will be enhancing our margins when we sell domestically. So, we will be looking at mid-market jewelry segment anywhere from the price point of Rs.25,000 retail all the way to Rs.4,00,000 retail should be a price point.”
- The Russian companies are unable to distribute natural diamonds in India due to dollar payment issues, because of which the prices of diamond has increased & the retailers are delaying the purchase orders for the same due to very high prices.
- The management will give more information about India business plans in Q2 concall, but it has guided for opening of its own stores in future.
- The company doesn’t has major differences in terms of yield per machine with peers.
- The company’s jewel fleet business has not gone as per plans & the company has pivoted where it will be used by the wholesale store owners as a sales tool to display the jewellery. The company has stopped any further investment in the development of the website & plans to add only new designs on the same.
- The company is bullish on the increased presence of its online biz & explained the biz model- “All our online sales are B2B online sales, so we sell through our retailer’s website, so for example, some of our large retailers, like brands of Cigna Jewelers, Walmart, JCPenney, etc., on their websites, we list our products and sales on those is what is counted over here.”
- The company’s growth strategy is tilted toward increasing its wallet share with the existing 5-6 retailers instead of adding more retailers as it would lead to competition with its own designs & products.
- The management believes that currently, there is no sizable organized domestic player in the LGD space.
- The management when asked about the reason for the higher inventory stated “the main reason for the higher inventory, as was mentioned by the chairman was the inventory held for e-commerce as one requirement and also the requirement to consign a certain amount of lab-grown diamonds with retailers in the US as this new industry category gets pushed into their stores. So, these are the two main reasons for the high inventory this year.”
- The company sources the diamond seeds from players of Japan, Turkey and Germany. The pricing of these seeds has dropped by 15-20% recently.
- The company has 100% capacity utilization for LGD.
- The company will not receive any benefits for reduction of import duty on diamond seeds as its facility is located in SEZ, so it has not paid any duty historically.
- The company is highly focused on the USA diamond market as it is more profitable, well structured, & higher market size as the country consumes more diamond on a per unit & per piece basis.
- The management when asked about the rationale for lower premium on the buyback price stated- “since it’s the phase of consolidation for the Company,, so the Company should be able to conserve some more cash for future expansions”.
Goldiam International is among the leading jewelry exporters in the country with a strong presence in countries like the USA. The company’s fortunes have improved significantly after the introduction of lab-grown diamonds which now contribute close to 25% of total revenues. The company saw a poor quarter with sharp revenue & profit degrowth of 15% & 29% respectively. The company is currently evaluating its entry into the Indian market & looking at growing its online presence. It remains to be seen how the company will tackle the current recessionary climate which is hurting its sales growth, coupled with higher competition in the LGD space from producers in Gujarat & Rajasthan & how will it allocate its surplus current investments & cash which are close to 250 Crs. However, given its strong past track record & growth opportunities in new geographies as well as in the LGD space, it remains an interesting stock to keep track of.