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MOSL: PC JEWELLER (Buy)-Strong domestic performance continues

PC Jeweller: Strong domestic performance continues

(PCJL IN, Mkt Cap USD3.6b, CMP INR586, TP INR685, 17% Upside, Buy)

• PC Jeweller’s (PCJ) sales grew strongly by 25.5% YoY to INR26.4b (est. of INR25.5b). EBITDA increased by 52.2% YoY to INR2.7b (est. of INR2.6b), while adj. PAT grew 52.1% YoY to INR1.6b (est. of INR1.4b).
• Segment-wise performance: a) Domestic sales grew 40.1% YoY to INR17.6b, with the EBIT margin expanding 240bp YoY to 13.5%. Sales in the base quarter had declined 20.6% YoY due to demonetization. b) Exports grew 3.9% YoY to INR8.8b, with the EBIT margin expanding 430bp YoY to 8.7%. This is on a high base of 42.6% growth in 3QFY17.
• EBITDA margin expanded 180bp YoY to 10.2%, led by gross margin expansion of 160bp YoY to 14% (est. of 13.5%).
• 9M performance: Sales, EBITDA and PAT grew 24.2%, 39.1% and 40.1%, respectively. EBITDA margin expanded 110bp YoY to 10.6%.
• Key takeaways from concall: (1) Domestic business guidance maintained at 30%. (2) Company will add 15 stores in 4QFY18, including 10 franchisee and 5 own stores. Store additions in FY19 and FY20 will be higher than in FY18.