Hope you are doing well.
Recently I was reading about Lab Grown Diamonds (LGD) which are fast gaining acceptability in the Indian market.
As per our understanding, currently Goldiam International is the only major listed company dealing in LGDs.
LGDs are chemically, optically and physically identical to earth mined diamonds, but are significantly more affordable.
As per Economic Times article, a carat of LGD costs ₹60,000-70,000, a fraction of ₹10-11 lakh for a natural diamond. Further, 60% YOY growth in the demand for LGDs is expected this festive season.
Below, we have shared interesting insights from the Q4 FY 23 con-call of Goldiam International. Hope you find the details useful for your own investments or to add the stock to your watch list.
Just a few days back we released our new stock recommendation for our Alpha and Alpha + Members.
It’s a sub 3,000 crore market cap company wherein we are expecting company might double its profit in the next 3-4 years
The management has introduced a new product line wherein they are targeting 600 crore + sales in FY 26 with EBITDA margins of 20-22%
The company is amongst the top 2 players in its industry
For more details on the stock recommendation – click HERE
Goldiam International – Insights from Q4 FY 23 con-call of the company
– Basic details
- Strategically, the increased focus on lab-grown diamonds and our omnichannel business model helped us achieve 36% gross margins for FY23 as against 31% in FY22
- Lab-grown diamond jewellery sales have also sizably added; The share of lab-grown jewellery in the overall mix stands at 23% in FY23
- While this category has faced some price erosion in FY23, we believe this has bottomed out as of date
– Ticket size
- Value for lab-grown diamond jewellery for last year was about $1,100 per piece
- For natural diamonds jewellery it was $530 per piece
- People are preferring to buy lab-grown diamond jewelry right now because the natural diamond price of the jewellery for the same styling is 10 times more priced
- Why LGD jewellery unit price higher than natural diamond jewellery – This is also a phenomenon of Goldiam’s strategy within the lab-grown diamonds space where we can focus on jewellery that is higher end within the lab grown space on the bridal market as well
– LGD price correction
- There is a lot of capacity that comes up in the growing side of the business in terms of lab-grown growing within the Gujarat and Rajasthan are
– How to sustain margin in LGD
- We have always historically seen distribution to be the main factor that will determine success in the lab-grown field
- We have focused on doing 100% captive consumption so that we can gain the benefit of additional margin in jewellery; we are focused on selling this not to wholesalers but directly to large retailers in America
- It helps us from the perspective of additional margins on the lab-grown side of the business, we can capture every margin component in the supply chain from growing right up until jewellery distribution to retailers
- We have always focused on distribution rather than just growing capacities without locked-in sales
– Balance sheet
- Cash and investments stand at Rs 256 crores
– Industry Scenario
- US is our largest market where we supply fine jewellery to large US retailers. The USA has been witnessing a record high of inflation, coupled with high-interest rates
- These factors have resulted in a multifold increase in mortgage payments, lending to a squeeze on discretionary, spending among mid-income segments in the United States
- This affected sales of fine jewelry in FY23
- The second half of FY23 and Q4 particularly saw US retailers undertaking a large-scale destocking
- Goldiam had to partner with key retailers and inventory realignment exercises by running strategic discount programs. This impacted margins during Q4 FY23
- Although the economic situation in the USA hasn’t completely stabilized, some green shoots are visible
- The Company’s focus is in transition further into lab-grown diamonds and e-commerce sales, which are healthier and more profitable business models with consumer salience
- We believe that increasing wallet shares with existing customers is the best way to grow
- Just by adding more and more retailers, we will be creating competition in our design between the two retail organizations
- We prefer to be working with the top five or six retailers in America, and we will be looking forward to growing our wallet size with them, whether it’s natural diamonds, whether it’s lab-grown diamonds, whether it’s bridal jewellery or whether it’s fashion jewellery or bands or tennis bracelets
Disclaimer: This is not a recommendation to buy/sell Goldiam International. The securities quoted are for illustration only and are not recommendatory.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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