Jerash: The Coming Months Could Be Challenging But The Company Is Cheap

Sep. 21, 2022 1:17 PM ETJerash Holdings (US), Inc. (JRSH)31 Comments

Summary

  • The company’s Q1 FY23 revenues rose by 12% to $31.4 million, and the gross margin stood at 19.8%.
  • However, major customers are placing smaller orders, and this means that the product mix has to shift to lower-margin items.
  • Jerash is bracing for flat sales growth in FY23 and the gross margin goal for the period is 16-18%.
  • Yet, I think the stock is cheap as the annual gross income at a 16% margin is about $23 million.
  • Jerash had a net cash position of $5.8 million at the end of June and its enterprise value is only $40.3 million.
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Introduction

Jerash Holdings (NASDAQ:JRSH) is a Jordan-focused apparel company which I covered on SA in early July. It's still on my shortlist and I think the Q1 FY23 results were strong as revenues grew by 12% and the gross

Jerash revenue by geographic area

Jerash

Jerash Q1 FY23 income statement

Jerash

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I have been investing in stocks for 13 years now, most of the time in my native Bulgaria. I have a bachelor's degree in Finance and a Master's degree in International Business and I like reading Pratchett and Michael Lewis. Regarding the opportunities that I cover, please take into account that I'm an admirer of legendary fund manager Peter Lynch so I tend to follow a lot of his investment philosophy.

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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