Kalyan Jewellers hits new high on expansion plans; stock up 14% in 3 days

Shares of Kalyan Jewellers surged 3 per cent to hit a new high since its market debut at Rs 122.95 in Tuesday’s intra-day trade. In the past three days, the stock of jewellery maker rallied 14 per cent after the company announced plans to expand its retail footprint by over 30 per cent through the calendar year 2023 (CY23).

The stock traded at its highest level since its debut on March 26, 2021. With this recent gain, the stock quoted 41 per cent higher against its issue price of Rs 87 per share. It has surged 123 per cent from its record low of Rs 55.20, which it had touched on May 11, 2022. In the past three months, the stock price of Kalyan Jewellers soared 45 per cent, as against 3 per cent rise in the S&P BSE Sensex.

Earlier this month, Kalyan Jewellers said that the company will look to target launching 52 showrooms over the next 52 weeks (12 months) as part of its strategic expansion plans.

"The CY23 expansion will mainly focus on the non-Southern region, which currently contributes 35 per cent to the Indian business. This approach is in line with Kalyan Jewellers’ vision 2025, which targeted revenue contribution from non-South markets of 50 per cent," the company said.

Following the strong demand momentum in metro markets and renewed interest among millennial consumers, the company planned to scale up existing operations in all the major metro cities.

"We are witnessing positive demand momentum and buoyant customer sentiments in the Middle Eastern business, with the region contributing approximately 17 per cent to its consolidated revenue. Growth has been consistent over the past three quarters, and the company is looking to initiate a pilot franchise model in the region, post which, a robust expansion plan will be laid out for its international operations," the company added.

That apart, analysts at ICICI Securities believe that the higher share of non-south revenues and increased studded sales were natural tailwinds for Kalyan’s margin profile and the benefit would continue to accrue for the next few years.

Therefore, the brokerage firm increased its earnings estimates by around 9 per cent for FY23-24E, modelling revenue and EBITDA CAGRs of 20 per cent and 26 per cent over FY22-FY24E.

"The delay in showroom expansion and potentially higher competitive intensity in core south India markets are key risks. However, the stock continues to trade above brokerage firm target price of Rs 103 per share," analysts added.