Hold Suraj Diamonds
Suraj Diamonds has beeen moving up since last 1 week and has moved up from 70 levels to currently at 112. We have been recommending investors to buy Suraj Diamonds since last few years from Rs. 40. Are argument had always been that fundamentally the scrip is highly undervalued. If you compare it with other companies in the same sector, the valuations given to suraj diamonds was very cheap. The company has been a consistent performer with steady continuous growth in EPS right from FY02.
The following table shows the consistent growth:
FY02 - EPS: 2.72
FY03 - EPS: 3.06
FY04 - EPS: 5.64
FY05 - EPS: 7.67
FY06 - EPS: 9.35
FY07 - EPS: 11.95
On an equity base of 40 crores, it declared a Net profit of 47.92 crores in FY07. It had accumulated reserves of 522.74 crores in FY07. In 1HFY08, it has already declared a Net profit of 24.15 crores.
Even after the recent jump in prices, at the current price of 112, it is still trading only 9.3 times its FY07 EPS. Whereas its peers like Classic Diamonds is trading at 16 times, Rajesh Exports is trading at 33 times, Shrenuj is trading at 15 times, Vaibhav Gems is trading at 22 times their FY07 earnings.
This suggests that there is still further upside possible in the scrip. We recommend long-term investors to hold on to this counter for higher prices.