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Get Over Titan. Here is a Lesser Known Beneficiary of the Upcoming Wedding Season

Oct 4, 2024

Get Over Titan. Here is a Lesser Known Beneficiary of the Upcoming Wedding SeasonImage source: shadowhawk70/www.istockphoto.com

Rs 10 trillion.

That's the amount of wealth wiped off in a single day, yesterday.

If you switch on your TV and tune into financial channels, you will see the experts listing out reasons.

Iran Israel conflict, China stimulus, regulatory changes, and so on.

That's mainstream media for you - good at coming up with a slew of reasons for every fall, or gain.

I will not get into that.

As I recently wrote to my subscribers...

  • Whatever it is (the event that will lead to more sanity in markets), guessing the timing or factor does not exactly help and is a futile exercise.

    The list of 'unknown unknowns' in the markets is always bigger than what we and the economic and market experts know and talk of.

    So, while we cannot predict, we remain prepared.

The fact is that Indian markets have been overvalued for some time now. And even now, remain so. This is why a correction is not surprising to us.

As Warren Buffett said, 'A pin lies in wait for every bubble and when the two eventually meet, a new wave of investors learns some very old lessons.'

Marketcap to GDP ratio, price to earnings, price/earnings to growth ratio or Smallcap to Sensex ratio, whichever metric you choose, the stats suggest a huge premium to median valuations.

But the most revealing of all is insider selling.

The insider sales are estimated at Rs 1 trillion this year. At this rate, it's almost six times of selling in 2018.

When the owner of the business is ready to part with ownership, there is a very good chance that he is getting a very good deal. At the other side of this deal is the retail and institutional investors.

Amid so much market uncertainty and the potential for corrections, it would be good to look for some defensive themes in investing.

I think the wedding theme could be one of them.

As per IBEF report, India is home to one crore weddings annually and is the fourth largest sector in India.

Vanity, celebration, aspirations and a once in a lifetime event...the emotions behind this event are such that people don't mind splurging, thus making it a defensive theme.

Even now, for most of the middle class Indians, this is the most expensive event in the family they save for their entire lives and spend it all with pride.

Some may find this extravaganza unnerving and unnecessary, but the truth is it keeps the economy going. In its prime season, it is estimated to have generated business worth Rs 4.74 trillion (Source: IBEF).

The typical budget for a wedding doles out huge share for venue and catering, gifts, wedding jewelry and garments, honeymoon, and event planning.

Some of the obvious names riding these themes are jewelry companies - Titan, Kalyan, PCJ, Senco, Thangamayil, PN Gadgil &Sons in this segment.

Within wedding attire, the well-known listed players include Vedant Fashions, Raymond, Arvind Fashions.

Within the gifting segment, companies like Ethos and La Opala tend to benefit.

With honeymoons, it is companies like Thomas Cook that ride the trend.

Here is a bigger list of key beneficiaries.

But there is one specific company that I want to talk about in a bit of detail - Sai Silks (Kalamandir) Ltd.

Remember I mentioned heavy insider selling at the start in this overvalued market.

Well, one of the reasons I am discussing it in detail is a contra trend. Insiders recently have bought this stock through an open market purchase.

This is one of the leading players in South India that offers ethnic apparel and value-fashion products through its four store formats - Kalamandir, VaraMahalakshmi Silks, Mandir, and KLM Fashion Mall.

Kalamandir is directed at middle income, VaraMahalakshmi is premium segment, Mandir is for ultra-premium segment, and KLM fashion mall is for the value segment.

The offerings are priced between Rs 200 to Rs 350,000. Its ethnic brands have one of the industry's leading repeat purchase rate.

Do note that South India itself is the largest saree market in Indian wedding and festive wear - accounting for about 50%.

The company is present across four states - Telangana, Karnataka, Andhra Pradesh, and Tamil Nadu, through online and offline channels. The company has plans to enter Kerala and Maharashtra as well.

From 6.5 lakh square feet of total store area, the company has plans to add 90,000 sq ft and then grow this base at 10-15% every year in new stores.

The stores are operated under a lease model. The company has 61 stores. By the end of 2026, the target for number of stores is 100. Most of this expansion will be on premium format, and the management expects better margins. It posted 18% operating profit margin in FY24.

The saree market is witnessing a shift from unorganised to organised sector. The share of organised sector was 14% in 2007 and improved to 32% in FY20. This trend bodes well for players like Sai Silks.

June quarter this year witnessed exceptionally small number of weddings in a decade, leading to a muted performance. The wedding dates in June quarter were down 70% YoY. Despite that, the company maintained 41.3% gross profit margin.

The debt is within a comfort range. The return on capital and return on equity in FY24 stood at 19% and 14%, respectively.

The stock was listed a year ago, at an offer price of Rs 210-222. It is currently trading at a discount from that price and is down 45% from its peak. At Rs 173, the stock is trading at a PE ratio of 31. The recent insider buying was at a level of Rs 174.

This is not a stock recommendation. The business has some inherent risks related to competition, execution on the store expansion front as well as shifting consumer preferences. Any investment decision should be backed by due diligence.

But amid an uncertain environment, this is a company you can put on your watchlist as a play on the wedding theme.

For more such updates, sign-up for-Profit Hunter.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure
What are the 3 main types of stock? Research Private Limited (formerly What are the 3 main types of stock? Agora Research Private Limited) (Research Analyst)

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2 Responses to "Get Over Titan. Here is a Lesser Known Beneficiary of the Upcoming Wedding Season"

Dr.Manish K Vashista

Oct 5, 2024

Definitely an interesting article. Purchase by promoter meaning promoter is confident about the business model & margins. IPO's are always expensively priced ,so price correction is good in a way. still PE & PB are on higher side. Stock can be placed in watchlist for future consideration.

Like 

CA Shaishav Vora

Oct 5, 2024

Very interesting pick.


Certainly worth doing a deep dive.

WHat will happen of the stock price will depend on numerous factors but definitely an interesting pick with good potential.

And most impoortantly, very few retail investors would have known this Company.

So definitely kudos for identifying a lesser known company & maing retail investors aware about it

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