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Profitability above our est.; store expansion on track

* PN Gadgil Jewellers (PNG) reported a 36% YoY rise in consolidated revenue to INR33.0b (est. INR32.5b) in 3QFY26. It was supported by a strong SSSG of 33%. Retail revenue rose 46% YoY, while e-commerce surged 138%; franchisee growth moderated at 12%, hit by a higher proportion of COCO store additions in FY26 (Exhibit 1).

* Festive sales during Diwali jumped 74% YoY to INR6.1b. Customer footfalls rose 33%, supported by a strong conversion rate of 94%. Management highlighted that healthy demand momentum has been sustained into the early part of 4QFY26 despite gold price volatility and expects the trend to continue going forward.

* PNG added three stores during the quarter, taking the total network to 66 stores (50 COCO, 16 FOCO), including five PNG Litestyle stores across 33 cities. The company targets 78–80 stores by FY26-end and plans to add ~25 stores in FY27, reinforcing its expansion strategy.

* GM expanded sharply 450bp YoY (post custom duty adjustment in base) to 14.4% (est. 11.9%). The expansion was driven by a product mix, rising Litestyle contribution (35–40% studded mix), and inventory gains from silver products (~3–4% revenue contribution). EBITDA margin improved 240bp YoY to 7.4% (est. 5.6%), an all-time high. Management guides for PAT margins of 3.75–4.0%, we model ~4% margin for FY27-FY28.

* We raise our EPS estimates by 8-12% for FY27 and FY28 due to a sharp expansion in margins. We model a CAGR of 19% in sales, 30% in EBITDA, and 30% in APAT over FY25-28E. Led by the successful execution of store rollouts, an effective gold hedging policy, and margin expansions, we reiterate our BUY rating on the stock with a TP of INR850.

In-line revenue; sharp beat on profitability

* In-line sales: PNG’s consolidated sales rose 36% YoY to INR33.0b (est. INR32.5b) in 3QFY26, led by the wedding and the festive season. SSSG stood at 33%. The retail segment (83% of revenue) recorded a growth of 46.2% YoY to INR27b. E-commerce revenue (5% of revenue) jumped 138% YoY to INR1.7b. Franchisee operations rose 12% YoY to INR2.5b, contributing 8% to total revenue. Volumes rose 25% QoQ and were flat at single digits YoY.

* Sharp expansion in margins: Gross margin improved 450bp YoY to 14% (est. 12%; vs. 11.9% in 2QFY26). Employee expenses rose 26% YoY, and other expenses rose 124% YoY. EBITDA margin expanded 240bp YoY to 7.4% (est. 5.6%, 4.9% in 2QFY26).

* Strong growth in profitability: The EBITDA doubled YoY to INR2.4b (est. INR1.8b). APAT grew 99% YoY to INR1.7b (est. INR1.2b). APAT margin came in at 5.2% vs. 3.5% (est. 3.6%) in 3QFY25.

* In 9MFY26, PNG’s net sales, EBITDA, and APAT grew 18%, 78%, and 83%, respectively.

Key takeaways from the management commentary

* Jewelry demand remained resilient in 3Q due to wedding and festive purchases, with ~40% of jewelry purchases through the old gold exchange scheme.

* Volume rose ~25% QoQ, while it grew in single digits or remained flat YoY in 3Q.

* The company added three new company-owned stores during the quarter at Moshi (Pimpri-Chinchwad), Patna (Bihar), and Viman Nagar under the LiteStyle format, taking the total retail footprint to 66 stores as of Dec’25.

* PNG LiteStyle currently contributes 5–6% of revenue, with a near-term target of 10% contribution.

* The company believes 13–14% gross margins, EBITDA margins of 7.0–7.25%, and PAT margins of 3.75–4.0% are sustainable

Valuation and view

* We increase our EPS estimates by 8-12% for FY27 and FY28 due to a sharp expansion in margins.

* With a more favorable product mix, operating leverage, and improved sourcing, the company is well-positioned to expand its operating margin. We model an EBITDA margin of ~6% for FY27 and FY28. We will monitor the operating cost expansion driven by new store roll-outs.

* The company has strengthened its balance sheet by reducing debt, having repaid INR3b from IPO proceeds. It has also implemented a robust hedging strategy through Gold Metal Loans (GML), achieving 100% hedging coverage. This will lower interest costs and further boost profitability.

* We model a CAGR of 19% in sales, 30% in EBITDA, and 30% in APAT over FY25- 28E. With the successful execution of store rollouts, an effective gold hedging policy, and margin expansions, we reiterate our BUY rating on the stock with a TP of INR850 at 22x Dec’27E EPS

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