Gitanjali Gems

Many a times it so happens that we see a stock moving up and we start wondering whether you should go for it – but then maybe something tells you to defer your decision and the next day you are upset to see the stock rise further and this continues for a few days and eventually you end up clinching your fists instead of the stock! If you are a keen observer, you will be able to identify many such stocks. One stock which has started exhibiting such behavior is Gitanjali Gems Limited.

Gitanjali Gems Limited may or may not be the next Titan but the stocks is buzzing off late. The stock hit a high of Rs 214 and a low of Rs 200.20 so far during the day.

Gitanjali Gems is reportedly in talks with private equity firms Blackstone, CX Partners, Bain, Apax and Advent for sale of 10% of its restructured brand holding company.

Meanwhile, Gitanjali Gems acquired 90% stake in Italy-based Giantti Italia S.R.L from its Dubai-based wholly owned subsidiary Gitanjali Ventures DMCC. The acquisition is aimed at growth of the branded jewellery business overseas and gains the designing and branding concepts expertise from Italy.

Very recently, Gitanjali Gems Ltd has incorporated a wholly owned subsidiary (WOS) In the name of "GITANJALI RESOURCES" in Belgium with a view to explore and expand it's businesses in Europe. Further the Company has announced that the main object of this WOS is to focus on the business of the Company in European Region and conduct core diamond and jewellery business in that continent.

Gitanjali Gems' consolidated net profit surged 51.7% to Rs 80.03 crore on 42.8% rise in net sales to Rs 2509.71 crore in Q2 September 2010 over Q2 September 2009.

The stock is pretty volatile. The 52 week high was Rs.395 and the 52 week low was Rs. 94/= and the stocks support and resistance are Rs.191 and Rs.227 respectively. The stock is trading at a PE of around 10, Book Value of Rs.254, Face Value is Rs.10/= and its Market Cap is Rs.1792. Incidentally, its rival Titan Industries Limited has a Marketcap of Rs.15,606 crores.

I would not be astonished if the stock appreciates by 50 per cent plus in one years time once it crosses the resistance level. Best buy would be below support, way below Rs.191 but will it go south as south can be – but don’t we eventually reach the north anyhow! The world is indeed round.

Think about it – do you wish to clinch your fists or the stock. You decide. After all, the money is yours, the risk is yours and the choice is yours too.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd