Introduction

Goldiam International Limited (NSE: GOLDIAM, BSE: 526729) is a leading exporter of diamond-studded gold and silver jewellery, serving institutional wholesale and retail clients globally. The company has been in this business for over three decades and has a strong reputation for quality, design and compliance.

In this blog post, we will analyze the business and dive deep into the growth prospects, fundamentals and technicals.

Company Structure

Goldiam International Ltd. is a holding company, which engages in the manufacture and export of diamond-studded gold and silver jewellery products. It operates through the Jewellery Manufacturing Activity and Investment Activity segments.

Business Analysis

Goldiam is rapidly transitioning from a pure natural diamond in-store jewellery company to a major supplier of Lab Grown Diamond Jewellery, with an omnichannel sales strategy.

But more than 95% of the revenue of the company comes from the exports of goods (mostly to the USA). So the company’s growth is highly linked to the economy of the USA. If the US economy is booming and discretionary spending is high, then the company will do well and vice versa.

Now, let’s talk numbers. Goldiam International Limited reported a revenue of Rs. 533.18 Cr. for the financial year 2022-23, a decrease of 22.47% from the previous year. The company attributed this to the US economy witnessing record high inflation, coupled with higher interest rates leading to multifold increases in mortgage payments & a squeeze on discretionary spending among mid-income segments in the US.

However, the company’s revenue and profit are on an upward trend in FY24. As there are rate cuts expected in the USA in the next twelve months, the company will see higher demand for its products in its most important market.

If we talk about quarterly performance, in Q3 FY24, the company continued to grow its top line and bottom line in a challenging environment. Revenues grew 10% YoY, and EBITDA grew 9% YoY with stable EBITDA margins of 21.3%. This resulted in the PAT growth of 12% YoY with the PAT margin standing at 15.8%.

The company has taken a two-pronged approach to improve its profitability. Firstly, it is focusing on increasing the share of lab-grown diamonds as they have lower costs and higher profitability. In Q3 FY24 Lab Grown Diamonds Jewellery’s contribution to the revenue mix

improved to 51.3% compared to 23.5% in Q3 FY23. The company is also planning a foray into India’s B2C market with its stores to offer Lab Grown Diamond jewellery exclusively.

Secondly, the company is focusing on increasing online sales. Goldiam International operates on the omnichannel model, but the online channel has a higher margin compared to stores. Revenue share through the online sales channel improved to 33.5% during Q3 FY24 compared to 27.3% during Q3 FY23 and 22% in Q2 FY24.

The company is also winning new orders. During Q3 FY24, Goldiam had won orders worth Rs. 70 Cr. for the export of gold studded diamond jewellery, the bulk of which constituted a supply of lab-grown diamond jewellery. These orders need to be fulfilled by March 2024. The order book position as of December 31, 2023, stands at about ₹ 115.0 Cr.

How Does the Company Fare On sharpely’s Tools?

Goldiam International is currently in the ‘Super Stock’ stylebox with a high QVM score. Also, an RSI of 59.17 indicates that the stock does not seem to be in the overbought zone.

The company scores well on all quality, value and momentum fronts at the moment as shown by our data-driven stock scores.

There are many positives about the company but growth remains the key concern at the moment. It will be interesting to see how the company performs in the coming quarters.

Technical Analysis

Currently, the chart of Goldiam International looks good. After the massive run in 2021 when the stock became a six-bagger in a year, it took a long pose. The price has been consolidated for more than two years.

Now, it seems like the price is breaking out with good volumes and the company is entering stage 2. With rate cuts on the horizon, the business is poised to do well in the coming quarters. The price is responding to the same thesis. If it crosses the Rs. 220 mark, then a new rally can start as it has already formed a long base of 24 months.

Risks

As the company operates in the Gems and Jewellery sector, it is exposed to all the relevant risks. The following are the different types of risks that the company faces.

Bullion Risk:

The volatility in the gold prices exposes the company to bullion risk as gold forms approximately 30% to 50% of the cost of the finished product.

Raw Material Supplies Risk:

Though India plays a dominant role in the Gems & Jewellery industry in terms of processing and consumption, the mining of gold and diamonds is amongst the lowest in the world. India imports gold and rough diamonds along with other precious metals.

Labour's availability Risk:

The gems and jewels industry is a highly labour-bounded and export-oriented sector. The labourers shifted back to their native places due to COVID-19 and the lockdown, which resulted in the non-availability of Laboure.

Currency Risk:

Currency risk arises from exposure to foreign currencies and the volatility associated in addition to that. 100% of the company’s exports have been transacted in US Dollars. While the company hedges the majority of its receivables, any sharp fluctuation in currency is likely to affect the cash flow of the Company as well as its profitability.

Geography Risk:

Dependence on any geographic location makes the Company’s business in that region vulnerable to the economic slowdown therein. As the USA continues to be their prime export destination, any bad news about the US economy can be a risk for the company.

Conclusion

Goldiam International Limited is a well-established player in the global diamond jewellery market with a strong track record of performance, resilience, and profitability. The company has been adapting to the changing market dynamics and customer preferences by expanding its product portfolio, geographical reach and online presence. The company has also invested in new technologies, quality standards and branding initiatives to enhance its competitive edge and reputation. The company's stock price has been reflecting its robust fundamentals and growth potential and has been trading at attractive valuations compared to its peers.

Disclaimer: The content presented in this article is intended solely for informational purposes and should not be considered as investment advice. The analysis and observations shared are derived from publicly accessible data. While utmost care has been taken to ensure accuracy, we do not warrant the information's absolute comprehensiveness or reliability.

Source: Company website