Gitanjali Gems - Buy Or Sell?

Recently, Gitanjali Gems had a fantastic run up from around 290 (in Jul 2012) to 600 (in Jan 2013). Looking at this, the stock doubled in just 6 months. The retail investors must be now confused – whether to buy at this level or not?

The answer can’t be plain Yes or No. Before we consider Yes or No, let’s consider some facts about this company and stock.

We need to stop comparing this company with Shree Ganesh Jewellery and PC Jeweller (even PC had fair run up after debut on NSE and BSE in last week).

This company now needs to be compared with Titan Industries which occupies esteem position in this segment of industry. I think so because Gitanjali has given consistent results in last 8 quarters irrespective of economic conditions in the world. Consistent EPS growth by organic and in-organic ways is in parallel to what Titan has been delivering. On the top of that, Gitanjali has brands which cater to various segments of consumers and it gives Gitanjali an upper hand.

Titan with CMP at 280, has a EPS of 8 (TTM) and hence P/E ration of 35. On the other hand, Gitanjali has consolidated EPS of 60 (TTM) and at CMP of 585, the P/E ratio is 9.75.

Hence, what we have seen till date is called “Re rating” of stock. The stock has been re-rated in past 2 months and has not reached it’s correct price. Will it go up to 700? The answer is Of Course it will. But will this happen in next 2 months? Nobody can answer.

My advice to retail investors is that invest in Gitanjali Gems with view of 1-2 years from now. Good time for market is around the corner, so you never know!! May be it will reach 700 in next 3 months if we are lucky J

Happy Investing!!


Disclaimer: This blog only expresses my views and talks about my analysis of the stocks. Please consult your financial adviser before buying or selling stocks. Stocks are risky investment instruments.