Overview

Founded in 2005, the company has built a reputation as a leader in the manufacturing of casting gold jewellery. With nearly two decades of industry experience, the company has expanded its operations to employ over 500 skilled professionals as of March 2024. Its state-of-the-art manufacturing facility, located in Navi Mumbai, covers an area of 81,000 square feet and has a production capacity of 9 tonnes per year. This capacity allows the company to effectively serve both the Indian and international markets.

The company’s products are widely distributed through established corporations, reaching 2,000 retail outlets across India and over 500 outlets globally. The Indian client store includes prominent brands such as Kenver, Zenna, Tazim, Kimora, and Sky9 Diamonds, among others.

The company emphasizes cultivating strong relationships with large retailers rather than using traditional advertising like billboards or airport displays. This strategy is bolstered by participating in prestigious jewellery events globally, reinforcing its commitment to trust within the industry.

In a strategic move to diversify its product offerings, the company recently acquired full ownership of Sparkling Chains Private Limited and Starmangalsutra Private Limited for Rs. 26  Cr. and Rs. 23.98  Cr., respectively. These acquisitions have enabled the company to expand into the jewellery segments of chains and Mangalsutras. The company remains committed to upholding the highest standards of quality and craftsmanship as it continues to grow and adapt to the evolving demands of the global jewellery market.

FY24 Financial Performance

• Total Revenue at INR 1749.2 Cr. v/s INR 1154.8 Cr. in FY23 (+51.4% YoY)

  EBITDA at INR 81 Cr. v/s INR 37.6 Cr. in FY23 (+115.3% YoY)

  EBITDA Margins at 4.6% v/s 3.3% in FY23 (+130 Bps YoY)

  PAT at INR 35.2 Cr. v/s INR 17.3 Cr. in FY23 (+103.5% YoY)

Promoter Analysis

Mr. Mangesh Chauhan (Managing Director & Chief Financial Officer)

• He owns 17.56% of the company

• Mr Mangesh Chauhan, a key promoter, brings over 15 years of expertise in the gem & jewellery industry. Starting from humble beginnings in Mumbai’s Zaveri Bazar in 2000, he co-founded "M/s Sky. oversees the finance department and actively contributes to marketing.

• His journey reflects a remarkable evolution from a local shop to a prominent player in the industry.

 Mr. Darshan Chauhan  (Co-director)

• He owns 17.44% of the company

• Focused extensively on product enhancement, styling, pricing strategies, and overall commercial development.

• He plays a pivotal role in conceptualizing and visualizing new designs. Managing marketing and sales for the brand, he keeps a keen eye on emerging trends in the market.

• It’s worth noting that Mr Chauhan has previously overseen overseas sales, showcasing his comprehensive involvement in the brand’s global presence.

Industry Outlook

• In the fiscal year 2023, the domestic gems and jewellery market was estimated at approximately INR 47,000 Cr. Gold jewellery dominated the Gems & Jewellery market with a commanding 66% share.

• In 2023, the global gold market was valued at approximately INR20 lakh crore, with the gems and jewellery market around INR41.7 lakh crore; by 2028, these markets are projected to grow to INR26 lakh crore and INR58 lakh crore, respectively, driven by rising global demand.

• In India, the gold market was valued at approximately INR3 lakh crore, and the gems and jewellery market around INR5 lakh crore as of 2023. These sectors are expected to grow steadily, with the gems and jewellery market anticipated to grow at a CAGR of 8-10%, reaching approximately INR4.4 lakh crore for gold and INR8 lakh crore for gems by 2028.

 Investment Thesis

• Post-Acquisition Boost for Sparkling and Star

  After the acquisition, Sparkling and Starmangalsutra saw strong growth, with Sparkling’s revenue rising to INR 200  Cr. and Star’s to INR 171 Cr. by FY 2023-24. Production capacity increased from 750 kg to 1,050 kg per month, while design output improved from 2,000 to 2,200 monthly.

  
  

• Optimising Inventory and Capital Cycle Management

  The working capital cycle currently stands at 74 days, but with the implementation of an ERP system, the company anticipates more efficient management. Over the next two years, the company aims to reduce the cycle to 45 days, driven by a decrease in receivable days as cash-and-carry transactions become more prevalent.

   

• Expanding Global Presence: Focus on B2B Markets

  The company serves clients such as Malabar Gold, Kalyan Jewellers, and Joyalukkas in Dubai, Singapore, and Malaysia. They are targeting the Indian expatriate community and planning entry into the US and European markets, with R&D for products aimed at Cosco and Walmart taking two quarters. Meanwhile, they continue to engage with corporates in their current markets, focusing on those with 50 to 200 stores.

Valuation and Recommendations

We recommend a "BUY" rating on Skygold, driven by the company's strong manufacturing capabilities, extensive market reach, and strategic expansion into new jewellery segments.

We value Skygold at 30x FY2027E Earnings Per Share (EPS) of INR 128.89, with a target price of INR 3866.78, a projected upside of 44% over the next 12-18 months

Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.