Buy Kalyan Jewellers Ltd for the Target Rs. 625 by Motilal Oswal Financial Services Ltd
Industry-leading growth; fast store rollouts
* Kalyan Jewellers’ (KALYANKJ) consolidated revenue grew 37% YoY to INR61.8b (in line). The Indian business achieved 38% YoY revenue growth, driven by store additions (added net 25 Kalyan Indian stores and 14 Candere stores) and 21% SSSG (20% in South, 22% in non-South). The momentum was well-sustained in Apr’25 (during Akshaya Tritiya) despite volatility in gold prices.
* Studded revenue growth (+47%) outpaced gold revenue growth (+38%), leading to a 200bp increase in the studded share to 31% (29.5% in 3QFY25).
* Gross margin for the Indian business contracted 90bp YoY to 13.3%. The margin contraction was likely due to the rising mix from franchised stores (40% revenue mix).
* EBITDA margin for the Indian business contracted 20bp YoY to 6.4% (due to a higher mix of franchise stores). Its PBT margin expanded marginally by 10bp YoY to 4.7%, though it was partly weighed down by higher finance costs from rising GML rates in 4Q. Meanwhile, PBT was up by a strong 41% YoY.
* The Middle East delivered 26% revenue growth. Studded share stood at 19%. There were no store additions during the quarter. ? With the successful scale-up of its new franchise businesses (~40 revenue contribution) and stable success in non-Southern markets, the company has established itself as a leading brand in the industry. We model 26%/21%/29% revenue/EBITDA/PAT CAGR during FY25-27E. We reiterate our BUY rating with a TP of INR625 (based on 50x Mar’27 P/E).
Robust revenue and PBT growth; rapid store expansion
India business
* Healthy revenue growth with double-digit SSSG: India revenue grew 38% YoY to INR53.5b and same-store sales increased 21% YoY. SSSG was 20% in the South regions and 22% in the non-South regions. Non-South markets showed promising growth, with revenue contribution increasing to 53% from 49% YoY. Studded share improved 200bp YoY to 31.1% in 4QFY25.
* Strong growth in profitability: EBITDA grew 35% YoY to INR3.4b; PBT grew 41% YoY to INR2.5b; and APAT grew 41% YoY to INR1.9b.
* In FY25, net sales, EBITDA, and APAT grew 37%, 28%, and 40%, respectively.
* Rapid store expansion: The company added net 25 My Kalyan stores in India, reaching a total of 278 stores. Candere added 14 stores, reaching a total of 73 stores. Total stores in India stood at 351. ‘My Kalyan’ grassroots stores reached 1,037 in 4QFY25, contributing ~19% to revenue from operations in India and over 27% to enrolment in advance purchase schemes in India.
Middle East
* Sales grew 26% YoY to INR7.8b.
* There were no store additions during the quarter.
* Studded share stood at 19%.
* Gross margin contracted marginally 10bp YoY to 14.9% and EBITDA margin expanded 40bp YoY to 7.5%.
* EBITDA grew 33% YoY to INR587m. ? APAT grew 22% YoY to INR121m.
* In FY25, net sales, EBITDA, and APAT grew 23%, 23%, and 14%, respectively.
Consolidated performance
* Consolidated revenue grew 37% YoY to INR61.8b (est. INR61.8).
* Gross margin contracted 60bp YoY to 13.8% (est. 13.2%).
* EBITDA margin was flat YoY at 6.5% (est. 6.5%).
* EBITDA grew 35% YoY to INR4.0b. PBT grew 36% YoY to INR2.5b and APAT grew 36% YoY to INR1.9b.
* In FY25, net sales, EBITDA, and APAT grew 35%, 25%, and 35%, respectively
Key takeaways from the management commentary
* The demand environment was stable during the quarter despite macro uncertainties. The Akshaya Tritiya festival showed strong demand trends, with customer sentiment remaining largely upbeat.
* The company highlighted that gold prices increased 30%, which affected the composition of its inventory, particularly in terms of 18 carat, 22 carat, lightweight, and heavy jewelry.
* Gold loan interest rates increased in the range of 2-2.5%. The peak interest rate was ~5%, but it has started to come down.
* The company reported a debt reduction of INR2500m in India during FY25. While the initial intent was to reduce non-GML borrowings, the reduction primarily came from GML due to temporary disruptions in the domestic GML environment over the last 3-4 months.
* The company plans to open 170 showrooms with 90 Kalyan and 80 Candere formats in FY26.
Valuation and view
* We have largely maintained our EPS estimates for FY26 and FY27.
* With the successful scale-up of its new franchise businesses (~40 revenue contribution) and continued success in non-Southern markets, the company has established itself as a leading brand in the industry. Its non-South expansion has improved the studded jewelry mix, while the asset-light expansion supports healthy cash flow generation for debt repayment and enhances profitability by reducing interest costs. It is also gaining momentum in the Middle East and US.
* We model 26%/21%/29% revenue/EBITDA/PAT CAGR during FY25-27E. We reiterate our BUY rating with a TP of INR625 (based on 50x Mar’27 P/E).
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