Multibagger stock: Up 644% in 2 years, where are Kalyan Jewellers India shares headed?

Shares of multibagger Kalyan Jewellers India Ltd delivered 644 per cent return in the past two years against a 102 per cent rise in the BSE consumer discretionary index and 51 per cent rise in the BSE Sensex during the same period. Analysts noted that the jewellery sector has experienced significant formalisation, with the organised market now accounting for 36-38 per cent of the total market, up from around 22 per cent in FY19.

This shift has been driven by an 8 per cent compounded annual growth rate (CAGR) in total market revenue from FY19-24, reaching Rs 6,40,000 crore, and an even higher 18-19 per cent CAGR in the organised sector. This has helped major players such as Kalyan Jewllers seeing 20 per cent CAGR during the same period.

Motilal Oswal Financial Services has initiated coverage on Kalyan with a 'buy' rating and a target price of Rs 525. Kalyan Jewellers India has a strong network of over 217 stores across the country. The asset-light expansion (franchise-driven) will generate the necessary cash flows to repay its debt in India over the next two years, the brokerage noted.

"The studded ratio of 28 per cent in FY24 was best in class and reflected the company’s understanding of evolving consumer trends, such as youth-led and non-traditional preferences. We model 29 per cent/26 per cent/41 per cent revenue/EBITDA PAT CAGR during FY24-26E. Initiate coverage on KALYAN with a BUY rating and a TP of Rs 525 (based on 45x P/E on FY26E)," it said.

Centrum Broking, which hosted Regional manager of Kalyan Jewellers covering semi-urban and rural regions of Haryana, Delhi NCR, Uttarakhand and western UP with 14 FOCO and own stores, said the demand remained strong for Kalyan despite higher gold prices. It said the average store size ranges between 3,000-4,000 per square feet. with average inventory of Rs 20-25 crore.

It said Akshaya Tritiya led strong volume growth during the mini wedding and festive season. The company is focusing on opening more FOCO stores in T2/T3 markets and believes its hyper local model is best suited for semi urban and rural regions, providing local preferences of gold/studded jewelry.

Centrum noted that the company's mature stores are clocking low double digit same store sale growth but new buyers contribution remained robust at 40 per cent. This brokerage has a target of Rs 495 on Kalyan Jewellers India. The stock settled at Rs 423.90 on Wednesday.

The stock has an average target price of Rs 476, as per Trendlyne, suggesting a potential 12 per cent upside.