The jewellery sector is shining bright as the sales have picked up after the pandemic and as the festive season is nearing. Analysts believe that a re-rating is on the cards as gold prices soften.
Kalyan Jewellers India Ltd posted strong earnings for the March to June quarter. The company saw robust momentum in both footfalls and revenue. Its reported net sales at ₹ 3332.64 crores in June 2022, up 103.61% from ₹ 1636.78 crores in June 2021. Its quarterly net profit increased by 110.37% from ₹51.31 crores in June 2021 to ₹ 107.94 crores in June 2022.
“Our mission is to open stores outside South India where the margins are higher and take the revenue mix to 50:50, which will take our EBITDA margins into double-digit numbers in a couple of years,” said Ramesh Kalyanaraman, ED of the company.
“In our jewellery segment, Q1 and Q2 are more south heavy, where the margins are a bit lesser, and Q3-Q4 are more of non-south heavy where the margins go upwards. South is more of a plain gold market whereas in non-south the studded ratios are usually higher, which gives us a better margin in non-south than in south Indian market,” he added.
The company has added seven new showrooms in the first quarter of FY23 and has also launched its first franchised showroom.
ICICI Securities believes that the company is delivering well on its key markers. They said that its return ratios are improving and it is expanding outside its core market of South India. They said that they like its commitment to the franchisee business and the company’s improving capital and investment discipline. In fact, they added that apart from Titan, Kalyan is the key potential national player.
The brokerage has maintained a buy call on the shares with a target price of ₹ 100 apiece. This translates to an upside of 29.45% as compared to its current market price of ₹ 77.25.
The shares opened at ₹ 69.80 on Tuesday, below their previous closing price of ₹ 70.25. However, they rallied 9.96% intraday. The shares have gained 18.99% in the past month.
Written by Simran Bafna
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