I have been following this stock since this stock since the beginning on 2022. After a difficult period (which created a bad financial situation), the company had a strong recovery since covid, thanks to a large improvement of their operations which led to a volume increase and a large cost cutting. In FY 24, they also benefited from record level for pearl prices (from around 40 $/pearl to more than 100 $) which had a strong effect on their margin.
However, prices began to turn during H2 24 and are now back to around 65 $.
It has always been difficult to value this company, as there are not many data available on pearl prices (in particular about the average price during the past cycles). The other problem is that, we can see that the company can again be loss making at the low point of the cycle, as their average cash cost (40-42 $) is close to the price before the recent increase price increase. So, the stock may have looked very cheap on a PE basis, but it was justified by the lack of visibility on future profitability.
The company has found a new strategy which could help them to be less cyclical. Atlas Pearls was saying, for some time, that they could sell their pearls at higher prices, out of auctions (auctions represent 70 % of their sales). I was sceptical about it, but they have proved it both in H1 24 and H1 25. In H1 25, they sold their pearls at 54 $ on average at auctions, but at 155 $ out of auctions.
They have not communicated much about these sales out of auctions. So we do not know much about their strategy there, but it is clear that it is already successful : these sales doubled in volume during H1 25 and are high margin given the average price.
This non auction business represents only 13 % of their volume, but 30 % of their sales and more than 50 % of their profit (according to my estimates for the profit).
Thanks to this new business (more stable than the auction business), it is also easier to estimate the value of the company.
