Buy Shringar House of Mangalsutra Ltd for the Target Rs.400 by Choice Institutional Equities Ltd
In line with estimate:
SHRINGAR reported a strong Q2FY27 performance, supported by stable demand, with volume growth of 10% YoY, in line with our estimates. Adjusted EBITDA margin declined due to higher operating and employee costs. Corporate customers contributed 51% of business (vs. 35% historically), supporting better payment cycles and repeat business. Bridal jewellery has achieved ~10% of manufacturing volume within six months of launch, with management targeting a scale comparable to the Mangalsutra business over the next 2–2.5 years.
Entry into B2C & other jewellery category:
The company has set up a whollyowned subsidiary with an initial investment of INR 20–50 Mn to enter affordable jewellery segments, including 9K gold, silver, platinum and labgrown diamonds. Targeting price points below INR 50,000, the venture will initially focus on online B2C sales, with launch expected in 2–3 months. Management indicated potential margins of 3–4x the existing business, while operating independently of the core B2B business.
Guidance:
Management remains optimistic on H2FY27, supported by a strong order book and festive/wedding demand. Revenue growth guidance of 30–40% CAGR and medium-term EBITDA margin guidance of 6–8% remain unchanged, driven by bridal jewellery scale-up and capacity expansion.
Q2FY27 result: Growth momentum maintained
* Volume was up 10% YoY and 53.7% QoQ to 577 Kgs
* Revenue grew 54.8% YoY and 49.3% QoQ to INR 8,187 Mn (vs. CIE estimates of INR 8,038 Mn), beating estimate by 1.9%.
* EBITDA grew 68.7% YoY. Adjusting for the forex loss in Q2FY26, adj. EBITDA grew 47.8% YoY and 12.3% QoQ to INR 549 Mn (vs. CIE estimate of INR 560 Mn). Adj. EBITDA margin contracted 32 bps YoY and 221 bps QoQ to 6.7% (vs. CIE estimates of 7.0%).
* Adj. PAT grew 72.8% YoY and 16.1% QoQ to INR 395 Mn (vs. CIE estimate of INR 374 Mn), beating estimates by 5.6%
Valuation:
We have increased FY27/FY28E Adjusted PAT estimates by 17%/10%, factoring in better-than-expected H1FY27 performance, supported by stable demand, higher capacity utilisation and an increasing contribution from bridal jewellery. We maintain our BUY rating and revise our DCF-based TP to INR 400 (earlier INR 330), implying 28.1% upside. The TP implies PE of 18.6x FY28E EPS and a PEG ratio of 0.6x.
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