As with Avanti Feeds, I picked Rajesh Exports from the screen of low debt, high growth companies with low P/E ratio.
Numbers and Narratives
Rajesh Exports is the world’s largest gold company with end-to-end prescense in the value chain of gold. They had a topsy turvey revenues growth over the last 5 years, even though the compounded growth is 31%, that value masks the drop in revenues after a steller year in FY16. I expect the company to revert to below average growth rate owing to the size of the company. I expect it to continue its miniscule margins owing to the nature of the business.
The core numbers that I arrive at based on the story are
- Compounded revenue growth for next 5 years = 20% (31% historical)
- EBIT margin in year 2 = 0.75% (~0.8% historical)
- Initial cost of capital = 7.91%
Valuation
I’ve used the above numbers along with the financial information to compute my DCF valuation for Rajesh Exports as seen below.
As you can see, the valuation price came out to ₹819.92, about 57% higher than the last traded price of ₹521.50.