Kalyan Jewellers India: Ignore noises, biz momentum strong, says ICICI Securities

ICICI Securities has upped its target price on Kalyan Jewellers India Ltd to Rs 520 from Rs 450 earlier, saying the jeweller has seen strong growth in the March quarter, despite a 15 per cent hike in gold prices, backed by vibrant consumer activity. The Thrissur-based gold jeweller is set to ramp up store openings, aiming for 90 annually, the brokerage said adding that it also intends to cut debt by Rs 400 crore by FY26 while also broadening the Candere network. ICICI Securities asked stock investors to ignore the recent noises, as Kalyan's business momentum is sustaining.

"Our earnings estimates remain unchanged, modelling revenue, Ebitda and PAT CAGR of 28 per cent, 25 per cent and 39 per cent over FY24-27E. We maintain ADD with DCF-based revised target price of Rs 520. At our target, the stock will trade at a multiple of 33 times FY27E EPS," ICICI Securities said.

Key risks included a delay in showroom expansion and potentially higher competitive intensity in core South Indian markets, the brokerage said. On Friday, shares of Kalyan Jewellers India were trading 1.35 per cent higher at Rs 473.30.

Kalyan Jewellers has displayed a healthy growth in the fourth quarter, even with gold prices shooting up by 15 per cent quarter-on-quarter, ICICI Securities said. This is the sixth consecutive quarter of gold price continuing to rise. The fresh demand surge can be attributed to strong wedding season, ICICI Securities said.

Kalyan is gearing up to launch around 90 new stores each year over the next two years under asset-light or capital efficient franchisee model. This ambitious plan includes scaling up its Candere brand, which is targeted at younger shoppers and gifting occasions.

Kalyan Jewellers, ICICI Securities said is confident of delivering strong same store sale growth (SSSG) in Q4. In the first three quarters of FY25, Kalyan outperformed industry by delivering 35 per cent YoY revenue growth against 20 per cent for Titan Company Ltd.

The growth momentum is also expected to remain strong in the Middle East, ICICI Securities said.

Despite volatility in gold prices, the brokerage said it is confident of Kalyan delivering strong long-term performance on the back of aggressive store expansion, superior brand equity and execution.

Kalyan’s management believes the recent increase in gold metal loan (GML) interest rate is unsustainable and anticipates a return to more normal levels soon. Over the past two years, gold prices have surged 55 per cent. Kalyan’s growth hinges significantly on a vigorous store addition strategy through a franchise model.

The company is targeting to open about 80 new Kalyan showrooms in FY25, which may translate to a retail expansion of around 40 per cent, similar to FY24.