I valued Rajesh Exports in April and found it to be undervalued at a trading price of ₹521.50. I bought the stock at that price and since then the stock grew at near the index’s rate of return. They released their Q4 results this past week and I took another look at their valuation with the new numbers while sticking to my original story.
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 = 8.00%
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 ₹557.48, very close the current trading price of ₹564.90. The stock has overshot its intrinsic value so, I exited this holding today.