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Growth momentum continues; miss on margins

* Kalyan Jewellers (Kalyan)’s consolidated revenue growth was at 46% YoY to INR105.9b (est. INR105.7b). The India business delivered 47% YoY revenue growth and registered a robust 28% SSSG (30% in the South, 27% in the non-South). Candere’s revenue grew to INR1,410m vs. INR660m in 1QFY26. Management indicated that on-ground demand momentum remained healthy in 1QFY27, driven by wedding traction.

* There is a one-time gain of INR410m due to an increase in customs duty from 6% to 15%. Adjusted for the gain, the India business GM dipped 280bp YoY to 10.8%. It was hit by a higher proportion of exchanged gold, promotional offers as part of the exchange campaign, and a one-off gain in platinum and silver sales during the base quarter (1QFY26). Studded share moderated to 28% in 1QFY27 vs 30% in 1QFY26. EBITDA margin contracted by 280bps YoY to 5.1% (est. 6.7%). PBT up 14% YoY. Candere reported a profit of INR21m (vs. a loss of INR100m in 1QFY26).

* The company added 12 net Kalyan Indian stores and 5 Candere stores, taking the total store count to 483 in India. It will open its first regional store in Chennai in Aug’26. In FY27, the company plans to open 84 Kalyan (all FOCO) and 50 Candere stores.

* The Middle East business delivered a 29% revenue growth, driven by 25% SSSG. Studded share was 16%. Demand picked up from the end of Apr’26. The company opened no stores during the quarter; however, discussions are underway with potential investors in the region for a larger FOCO partnership.

* With the successful scale-up of franchise businesses (>50% revenue contribution) and stable success in non-Southern markets, Kalyan has established itself as a leading brand in the industry. Consistent success on customer acquisition, improving operating margin, and deleveraging the balance sheet remains the key rationale for our constructive view on the business. We model a 24%/18%/23% revenue/EBITDA/PAT CAGR during FY26-28E. Reiterate BUY with a TP of INR700 (based on 35x Mar’28E P/E).

Key takeaways from the management commentary

* The company highlighted that demand on the ground continues to remain healthy, with July witnessing strong traction similar to the trend seen in 1QFY27.

* The company recycled gold, contributing over 46% of revenue during 1QFY27 and exceeding 55% in June. Management intends to maintain the recycled gold contribution in the 55-60% range going forward.

* Kalyan unveiled its first regional jewelry brand, Akshaya Thangam, designed exclusively for the Tamil Nadu market.

* Kalyan remains on track to become debt-free (excluding gold metal loans) by the end of Sep’26.

* In the Middle East, discussions are underway with potential investors in the region for a larger FOCO partnership

Valuation and view

* We cut our EPS estimates by 3-4% for FY27 and FY28.

* Kalyan repaid INR5.6b of non-GML debt in FY26, taking the total debt to INR3.2b.

* Management reiterated its target of becoming non-GML debt-free during FY27.

* With the successful scale-up of its new franchise businesses (>50% 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.

* We model a 24%/18%/23% revenue/EBITDA/PAT CAGR during FY26-28E. We reiterate our BUY rating with a TP of INR700 (based on 35x Mar’28 P/E)

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