Thangamayil Jewellery (THANGAMAYL) Q4 09/10 earnings summary

Executive summary

• FY2010 sales rose 83% YoY to Rs 45,140.57 lakhs; EBITDA increased 65% to Rs 3,092.04 lakhs and PAT reached Rs 1,606.70 lakhs.

• Three new stores opened during the year, bringing the network to seven outlets; expansion into four more locations was planned for FY2011.

Financial highlights

• Sales and other operating income was Rs 45,140.57 lakhs vs Rs 24,685.56 lakhs; growth was driven by volume and price/yield increases.

• EBITDA was Rs 3,092.04 lakhs vs Rs 1,877.87 lakhs, up 65%; PBT rose 74% to Rs 2,351.40 lakhs and PAT to Rs 1,606.70 lakhs from Rs 887.52 lakhs.

• EPS was Rs 16.46 vs Rs 10.07; net worth was Rs 6,926.72 lakhs vs Rs 2,699.49 lakhs.

• Other operating income fell to Rs 45.78 lakhs from Rs 197.72 lakhs, primarily due to losses on gold hedging/trading.

• Input costs for raw materials, packing materials and finished goods remained near 89% of sales; advertising and promotion rose to 1.45% of sales from 0.87% as branches expanded.

Outlook and guidance

• Target was to expand from seven outlets to eleven locations by end-March 2011, with deeper penetration into rural and smaller towns in southern Tamil Nadu.

• Customer care centers and a franchise-dealer model were under consideration to extend reach into smaller, unrepresented towns.

• IPO proceeds, internal accruals and undrawn bank limits were expected to fund the ongoing retail expansion and working-capital needs.

• Management expected the replicable town-based retail model, quality focus and consumer awareness to support growth and maintain net margins despite competition.