JM Financial initiates coverage on Kalyan Jewellers, sees 19% upside

Kalyan Jewellers share price today: JM Financial has initiated coverage on Kalyan Jewellers stock with a 'Buy' rating, citing expectations of strong growth in India's organised jewellery segment. As per the brokerage firm, the sector is anticipated to see a double-digit growth of 20 per cent over the financial year 2023-2024 (FY24) to FY28E. That apart, the stabilisation in price levels of gold is a support factor for organised brands like Kalyan, which is the 4th largest player in the domestic jewellery market. 

JM Financial has set a target price of ₹700, implying an upside of 19 per cent from Tuesday's closing market price of ₹588. Kalyan's focused expansion strategy and shift to a franchise model have proved to be highly capital efficient, as per the brokerage firm. 

 

On Tuesday, the stock witnessed a moderate rise of 1.5 per cent, logging an intraday high of ₹594.70. The stock has recovered 45 per cent from its 52-week low levels of ₹399.4 touched on March 11, 2025.

 

"Kalyan has shown robust growth of over 26 per cent year-on-year (Y-o-Y) in revenue and profit after tax (PAT) over the last 8 quarters. We believe that this sustained performance has made the company a positive outlier in the discretionary space and will eventually result in re-rating of the stock," JM Financial said.

 

While the shares of the jewellery brand have remained in red so far this calendar year, experiencing a double-digit drop of 24 per cent on the bourses, the brokerage firm believes that the tide has turned. 

Shift to franchise model

Kalyan Jewellers' shift to 'franchise-owned, company-operated' (FOCO) model has helped the firm add 74 stores in FY25 alone, in India. The company is planning to add 85-90 stores every year over FY26-28E. 

"This model is capital efficient for the company, considering the investment in store inventory in done by the franchise partner, which helps in faster rollout of stores. Strong return ratios for both the franchise partner and Kalyan ensure a long runway for the partnership," the brokerage firm stated in its report. Meanwhile, Kalyan's omni-channel network, which comes via Candere, has further increased its revenue channels.

Sectoral tailwinds at play

India's jewellery market is expected to grow at a compound annual growth rate (CAGR) of 16 per cent to ₹11.6 trillion. Interestingly, the unorganised sector's playbook earlier led to increased competition in the space. This was largely owing to a lack of regulatory play and higher inventory gains, which came on the back of a rally in gold prices. However, the brokerage firm believes that unorganised players might soon lose their edge with stabilising gold prices and a stronger regulatory picture.

 

The organised jewellery sector is expected to grow at a higher rate than the overall market. On top of this, the organised sector's share is anticipated to increase from 38 per cent in FY24 to 43 per cent by FY28. "This will be led by improved pricing transparency, better quality, higher service expectation, increased promotional campaigns and some impact of consolidation in the industry due to increased regulatory frameworks," the brokerage firm said in its report.

Kalyan Jewellers vs Titan

According to JM Financial, Kalyan Jewellers is currently trading at 40x its estimated FY27 earnings (pre-Ind AS), which is about 24 per cent lower than its peer Titan. The firm has assigned a lower PE multiple of 45x to Kalyan, compared to 57x for Titan, citing the latter firm's stronger margins and superior return ratios.  Kalyan still trades at a 10- 40 per cent discount compared to other discretionary players like Avenue Supermarts, Metro Brands and Campus on a PE basis, even though it is expected to deliver higher revenue and profit growth between FY25 and FY28, as per the brokerage firm.