This microcap stock has surged 600% in one year. Brokerage sees more upside

Multibagger stock: After climbing to its life-time high of ₹201 apiece levels on BSE, Radhika Jeweltech shares have remained under consolidation phase due to profit-taking trigger. However, in last one week, this microcap multibagger stock has shown some upside swing. Stock market experts are taking this upside movement as an indication from the multibagger stock about coming out from the base building mode. Radhika Jeweltech share price today is around ₹165 and Bonanza Wealth Management believes that the stock may go up to ₹203 apiece levels in long term, around 25 per cent upside from current price.

Highlighting the valuations that may continue to fuel Radhika Jeweltech share price, Bonanza Wealth Management report says, "Radhika Jeweltech outsources the making of jewelleries from specialist manufacturers while the company focuses exclusively on sales. It has established strong relationships with manufacturers that exclusively design and manufacture jewellery pieces for the company. Radhika Jeweltech incentivized manufacturers for providing them enough orders to enable it to run at full capacity while the exclusivity arrangement ensures that other jewellers do not have access to the designs used by Radhika Jeweltech, which remains unique to the Radhika brand. The manufacturing cost of jewellery ranges between Rs.250-350 per gram depending on the market rate of gold and the intricacy of design."

The brokerage report went on to add that Radhika Jeweltech has planned a new showroom of 10,000 sq. ft. in Kalawad Road, Rajkot expected to be operational by Q2FY23E. New showroom will be manned by approximately 150 sales representatives and it is expected to drive its revenues to a significantly higher trajectory. By virtue of being located in Rajkot’s posh localities, the new showroom is expected to sell a higher percentage of diamond and platinum jewellery products. Radhika Jeweltech has also plans to open showrooms in other major cities such as Bhavnagar, Bhuj, Gandhidham, Morbi and Jamnagar, and subsequently in other areas of and outside Gujarat.

"Radhika Jeweltech has policy to immediate replenishes its gold inventory with the quantity of gold sold once a piece of jewellery is sold to a customer. As the selling price is calculated on the basis of the prevailing market price, the immediate replenishment mitigates the risk of cost of inventory going up due to any rising gold prices. Further, the company settles the bill with manufacturers in physical gold terms as opposed to any cash payments," Bonanza report informs.

On its suggestion to positional investors in regard to Radhika Jeweltech shares, Bonanza Wealth Management report said, "With a wide range of jewellery designs in gold and diamond-studded for men and women, gems and jewellery market is expected to grow at a CAGR of 8.4%, outsources the making of jewelleries from specialist manufacturers and new showroom of 10,000 sq. ft. in Rajkot, we value Radhika Jeweltech at 13.0x FY24E EPS of Rs.15.50 to arrive at target price of Rs.203.00, an upside of ~25%."

Radhika Jeweltech shares are one of the multibagger stocks that Indian stock market has produced in last one year. In this period, Radhika Jeweltech share price has ascended from ₹23.55 to ₹165.20 levels, recording more than 600 per cent rise in this period. On Tuesday, this microcap stock ended with a market cap of around ₹389 crore with trade volume of little above 22,000. This multibagger stock has made 52-week high of ₹201, which is its life-time high as well. Its 52-week low is ₹23.55 per share on BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.