Kalyan Jewellers India Ltd.’s share price rose in early trade on Friday after the management guided for better earnings and store openings next year. The stock surged as much as 5% to Rs 463 per share soon after the market opened.
The company’s third-quarter earnings were received positively by brokerage Citi though it cut its target price on the stock. The Thrissur-headquartered jeweller has seen its stock value tank 42% this month.
Citi reduced its Kalyan Jewellers target price from Rs 810 to Rs 650, implying a return potential of 47.5% over Thursday’s close.
Sustained franchise-led store expansion should aid in driving higher growth, deleveraging of balance sheet and improvement in return on capital employed, Citi said, while slashing earnings projection for the current and the next two financial years.
The revised target price is based on 48 times the December 2026 consolidated earnings estimate and is set at around 15% discount to industry leader Titan Co.’s target price-to-earnings.
Citi’s base case assumes 31%, 26% and 37% consolidated revenue, Ebitda and recurring EPS growth on a compounded annual basis over three years. “We think steady execution and consistent earnings delivery are key to the stock’s re-rating,” it said.
No Further Impact Of Custom Duty Cut
Ramesh Kalyanaraman, executive director, said the company’s December-quarter earnings witnessed the impact of July’s gold custom duty reduction. “By negating the loss from custom duty, the PAT rose 55% consol. There is no more impact to come now,” he told NDTV Profit.
He also said the company can repay Rs 150 crore debt this year, following which, it can either open owned stores or go for stock buyback. “We will not change our strategy due to current sharp decline in stock price. Approximately 25% of promoter shares are pledged and will not increase further,” he said.
The company expects the profit-before-tax growth to outpace revenue growth due to the increasing adoption of the franchise model. In the third quarter, same-store sales growth was 23% in South India and 25% in non-South markets.
While the Ebitda margin will see a temporary decline due to expansion in the franchise-owned company-operated model, the company plans to resume company-owned store additions once the debt is repaid.
In FY26, Kalyan Jewellers plans to add 90 stores and 80 Candere stores.
Candere’s revenue is projected to reach Rs 1,000 crore in the next three–four years, and by FY27, the revenue split between franchise and company-owned stores is expected to be 50:50, with margins stabilising at approximately 6%.
. Read more on Markets by NDTV Profit.Citi reduced its Kalyan Jewellers target price from Rs 810 to Rs 650, implying a return potential of 47.5% over Thursday’s close. Read MoreMarkets, Buzzing Stocks, Business, Notifications, Budget
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