Goldiam International Rs 360
Almost exactly an year back, in November 2023, Goldiam International was discussed, then at market price of Rs 160. It has more than doubled to Rs 360 today. But now the stance has been changed to ‘not sure’ following certain developments.
Goldiam International’s Q2FY25 was tepid with revenues flat at 141 Cr, Ebitda up 4% at 35 cr, PAT down 4% at 33 cr. Ordinarily, a one quarter miss does not affect the long-term view about a company. But in this case, there are a few other factors which necessitate rethink.
First, the revenue miss this quarter is attributed by the management to a two day delay in despatches to US customers because of flight disruptions. Even if it is correct, it seems a bit puzzling.
Second, as per Q2FY25 concall, the company has marked up its inventory by 15 Cr without which the PAT would have been only 18 cr instead of 33 cr. Generally, inventory is valued at cost or market value whichever is lower. Why the company has chosen to revalue its inventory is not clear. Assuming it was kosher to revalue the inventory, the right way should have been to route it through its Balance Sheet so that profits remained unaffected due to this book entry. Further, the management should have made this fact clear to investors in the concall. Instead, when asked specifically whether the profits were inflated by 15 Cr due to inventory mark up, management responded that they would get back on this.
Third, Trent Ltd which runs Westside and Zudio stores has entered the lab grown diamond studded silver jewellery segment. With its huge reach and brand equity, Trent could give very strong competition to Goldiam Ltd own B2C venture ‘Origem’.
Fourth, the company has plans to open 10-12 stores in FY25 under Origem brand in three metros. This is going to pull down Ebitda margins from around 22% levels to 18% as per the management thereby hitting profitability unless the showrooms turn profitable from day one. With competition from new players like Trent, this remains to be seen.
Lastly, exports to the US contribute more than 50% of its topline. With Trump’s declared love for tariffs on imports, there could be a possibility of Goldiam’s sales to US getting affected.
While there is a lot going in favor of the stock and there are chances that all the above doubts may prove unfounded but the conviction stands weakened. Will reconsider the stock when clarity on the above issues emerges.