Overweight on Rajesh Exports – Morgan Stanley

In a research report released just a while ago, Morgan Stanley[MS] is bullish on the prospects of Rajesh Exports Ltd. MS has initiated coverage with a overweight on Rajesh Exports with a price target of Rs 1,051.

Bangalore based Rajesh Exports is the largest exporter of jewellery from India and now wants to shift its business mix towards the three higher-margin businesses of diamond jewellery, private label jewellery, and Retail Jewellery market in India.

The company is at an inflection point from where its three pronged growth strategy will lead to higher margins and earnings. We believe this growth is not fully captured in the stock price given that at current price the stock trades at 12.9 times F2009e earnings and at an attractive implied PEG of 0.60x.

12-month price target of Rs1051 implies 24.9x F2008e earnings and 15.9x F2009e earnings. The company is well poised to achieve good earnings growth for the next few years based on favourable industry macro factors and its three-pronged growth strategy. The company has changed its focus from revenue growth to margin expansion.

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