Kalyan Jewellers shares rally 17% in three days; here’s why

Shares of Kalyan Jewellers India jumped nearly 9% to touch a fresh record high on domestic bourses today, driven by a strong rally for the last three sessions. The jewellery stock has risen as much as 16.75% in three days after a target price upgrade by HSBC Securities. The global brokerage has raised the price target to ₹810 per share from ₹610 estimated earlier, while maintaining a 'Buy' rating on the stock.

Extending gains for the third session, Kerala-based Kalyan Jewellers shares opened higher at ₹699.30, up 1.4% against the previous closing price of ₹689.50 on the BSE. In the first two-hours of trade so far, the largecap stock surged as much as 8.6% to touch a new all-time high level of ₹749, while the market capitalisation increased to ₹76,480 crore.

The share price of Kalyan Jewellers has risen 270% from its 52-week low of ₹202.60 touched on September 25, 2023. In the calendar year 2024, the counter has risen 106%, while it jumped 92% in six months and 34% in a month.

HSBC in its latest report said that the company is still "only midway into its value creation journey", and its valuations are still at 10% discount to market leader Titan Company.

Despite 8x growth in Kalyan’s share price in the past two years, HSBC remains bullish on the stock, saying that the company is still "only midway into its value creation journey". The brokerage believes that the stock’s valuations are still at 10% discount to market leader Titan Company.

The brokerage opines that Kalyan’s stock is currently trading at an estimated FY26 PE ratio of 56x, nearly 10% lower than Titan, making it an attractive buy compared to other consumer sector plays. The company’s capital light expansion, emergence as an entrenched national brand like Titan to help further rally, it says.

Last month, Kalyan Jewellers India promoter Trikkur Sitarama Iyer Kalyanaraman announced to acquire a 2.36% stake worth ₹1,300 crore from Highdell Investment Ltd, an affiliate of U.S.-based private equity investor Warburg Pincus. Post the transaction, the ‘promoter’ and ‘promoter group’ shareholding in the company will increase from 60.59% to 62.95%.

Motilal Oswal in a recent report said that Kalyan's hyperlocal strategy continues to drive its success in new markets, with fast learning and better preparation for competition. The company is confident in its expansion plans, targeting 80 new stores annually through its FOCO model, enhancing store-level execution and franchise participation. 

Currently, the company operates in 23 states, having 76 showrooms in South India, 48 in North and Central India, 23 in West India, 16 outlets in East India, and 33 in the Middle East.

“Leveraging local consumer preferences, KALYAN has built strong entry barriers and deep community connections. Its asset-light approach aims to reduce leverage, with plans for 80 new FOCO stores in India and six internationally by FY25. Effective localised marketing and innovations drive customer engagement, while strong financials and debt reduction efforts underpin growth,” it said in a report released in July this year.

In FY24, Kalyan repaid ₹400 crore in non-GML loans in India, reducing overall working capital loans by ₹260 crore. The company plans to allocate 40-50% of profits to debt repayment and shareholder payouts, and declared a dividend with a payout exceeding 20% for FY24, double that of FY23. Additionally, it reduced non-GML loans by ₹430 crore and also secured an additional GML limit of ₹170 crore, thereby scaling down its overall working capital.

“Management aims to reduce its total debt by ₹700 crore over the next couple years. It targets to reduce its debt by ₹300 crore in FY25,” the brokerage said in the report.

Kalyan has devised a strategy to operate through both company owned, company operated (COCO) and  franchise owned, company operated (FOCO) models in Indian and international markets. This approach aims to adopt an asset-light model, reducing leverage on its balance sheet.

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