>RENAISSANCE JEWELLERY (SUNIDHI)

Company Description: Incorporated in 1989 as Mayur Gem and Jewellery Export Private Limited, RJL was engaged in the business and manufacture of jewellery. In 1997, the Company's name was changed from Mayur Gem & Jewellery Export Private Limited to Renaissance Gem & Jewellery Export Private Limited. In 1998, Sur Style Jewellery Private Limited ('Sur Style') engaged in manufacture and export of studded jewellery was merged with company. In 2005, the Company was converted to a public limited company and the name was changed to Renaissance Jewellery. It tapped the capital market with an issue of 53.24 lakh shares at a price of Rs 150 per share aggregating 79.86 crore. From the IPO proceeds, RJL incurred Rs 35 crore on the US subsidiary, Rs 10.5 crore on increasing manufacturing capacity at Bhavnagar, Rs 4-5 crore for modernisation of its Mumbai facility and rest for the working capital.

Investment Rationale:
RJL has eight retail outlets (five in Mumbai, one in Pune, one in Lucknow and one in Gurgaon) and 16 shops. The retail products are sold under the brand name, Lucera. RJL is in the process of increasing outlets. RJL has two subsidiaries, Renaissance Jewelery New York Inc., which caters to independent mid-range retailers and Verigold Jewellery (UK) serves as a marketing and trading hub in UK and rest of Europe. Its supplies to major retailers like Wal-Mart, NBC, JC Penny & Zales.

Renaissance has a modern design studio complete with a state-of-the-art CAD/CAM facility. Its dedicated team of 40 designers is, well versed on the latest international trends and contributes at least 500 innovative designs monthly to its ever-expanding portfolio of over 25,000 styles. The majority of its current models are produced using CAD/CAM to ensure precision.

USA is the world's largest jewellery market. In the US, Christmas, Thanksgiving, Valentine's Day and Mother's Day are the important jewellery-buying occasions. The US jewellery market has grown at a compound annual growth rate of 5.7% over the last 25 years. RJL is US centric for last 11 years, but will soon move into Europe, Middle East and South East Asia markets. Expects margins expansion as it is able to pass on the full price hike to their customers.

During FY09, Indian Gem & Jewellery industry made exports of $21.1 billon Vs $20.8 billon in FY08. During April-January 2010, exports of gem & jewellery from India have gone up by 14.3% to Rs 1.07 lakh crore according to Gems and Jewelley Export Promotion Council. In dollar terms, exports are up 7.42% to $22.54 billion. The data showed that import of rough diamonds too has gone up 4.82 per cent to Rs 33, 900 crore. The domestic market is estimated to touch USD 28-29 billion in next 3 years by 2012.

The projected share of industry segments and key consumption market trend show that by 2015 China and India together will emerge as a market equivalent to the US market. The Middle East will surface another large market accounting for close to 9 of the global jewellery sales by 2015. The industry has a potential to grow up to US$ 280 billion by 2015 at a CAGR of 6.7%. These augur well for the industry players. RJL is likely to post an EPS of Rs 20 in FY10 and Rs 24 in FY11. At the CMP of Rs 71, the share is trading at a P/E of 3.5x on FY10E and 3.2x on FY11E. We recommend BUY with a target of Rs 100 in the medium term. The stock is in an uptrend as it is moving along the upsloping support trendline. Considering its big fall from early 2007 and its bottom in beginning of 2009, the stock can be seen forming a rounding formation. Technically, the upside target is Rs 115.

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