Buy Shanti Gold Ltd for the Target Rs.350 by Choice Institutional Equities
Business Overview: SHANTIGOLD, originally founded as a partnership firm M/s Shanti Gold on August 5, 2003, is a leading manufacturer of 22kt CZ casting gold jewellery, offering a broad portfolio of intricately designed bangles, rings, necklaces and complete jewellery sets across wedding, festive and daily-wear categories. These have been tailored to diverse client preferences; it maintains strong relationships with major corporate jewellery retailers, such as Joyalukkas India Limited, Lalithaa Jewellery Mart Limited, Alukkas Enterprises Pvt Ltd, Vysyaraju Jewellers Pvt Ltd and Shree Kalptaru Jewellers (I) Pvt Ltd, serving customers across 13 Indian states, a solitary union territory and four international markets (the UAE, the US, Singapore and Qatar).
How is SHANTIGOLD positioning itself for high-growth in the next few years and what revenue visibility does the management provide in the light of its capacity expansion plans?
SHANTIGOLD is entering a high-growth trajectory supported by a sharp scale-up in manufacturing capacity. At present, the company operates at ~2,700 kg per annum and is adding 4,000 kg in Mumbai along with 1,200 kg in Jaipur, with both facilities expected to be commissioned by H2FY27. This expansion is aligned with rising outsourcing demand from large, organised jewellery retailers who prefer reliable, scaled manufacturing partners. The management has guided for 60–70% growth in FY27, supported by (a) 30–40% volume growth, which is in line with H2FY26 volume growth post-IPO gold purchase backed by new capacity addition, new product launches and expansion into the untapped North region and (b) Forecast ~30% gold price inflation based on the average FY26 gold price of INR 126,000/10gm
What strategic initiatives is SHANTIGOLD undertaking to improve earnings quality and reduce volatility?
How will export expansion, product diversification and financial risk management support sustainable margin stability?
Beyond revenue growth, SHANTIGOLD is enhancing the quality and sustainability of earnings through geographic diversification and tighter financial discipline. The company is reducing reliance on the domestic market by scaling up exports, targeting an increase in export contribution from ~2% to 10%, supported by its newly-established Dubai office. Concurrently, it is broadening its domestic playbook by entering the Mangalsutra segment and introducing a mass-market Turkish jewellery range, expanding its addressable market and targeting higher-volume categories.
View & Valuation:
We value the company using the DCF approach, having a target price of INR 350, with a 60% upside and a BUY rating. This equates to an implied PE of 6.8x on FY28 EPS and a PEG ratio of 0.14.
Risks:
* Dependence on gold prices: Profitability is sensitive to gold price fluctuations, impacting raw material cost and margin
* High product concentration risk: Dependence on 22kt CZ jewellery makes the company vulnerable to demand shifts towards 18kt and 14kt segments, potentially impacting revenue and profitability. However, the company’s foray into plain gold jewellery and mangalsutra provides diversification and mitigates concentration risk, offering growth optionality.
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SEBI Registration no.: INZ 000160131
