Kalyan Jewellers trades near record high, up 11% on strong Q2 biz update

The company said it continues to witness robust momentum in both footfalls and revenue across all its markets in India and the Middle East.

Shares of Kalyan Jewellers surged 11 per cent to Rs 261 on the BSE in Friday’s intra-day trade on the back of heavy volumes after the company reported a consolidated revenue growth of around 27 per cent year on year (YoY) for the quarter ended September 2023.

At 01:34 PM; the stock was trading 10 per cent higher at Rs 257.85, as compared to 0.52 per cent gain in the S&P BSE Sensex. It was quoting close to its record high of Rs 261.95 touched on September 1. The average trading volumes at the counter more-than-doubled today. A combined 11.4 million equity shares changed hands on the NSE and BSE.

The company said it continued to witness robust momentum in both footfalls and revenue across all its markets in India and the Middle East. For the first half (April to September) of the current financial year (H1FY24), consolidated revenue grew around 29 per cent when compared to the same period in the prior year, Kalyan Jewellers said in its quarterly update.

The company saw revenue growth of around 32 per cent for India operations during Q2FY24 as compared to Q2FY23, led by robust operating momentum on the ground with healthy same-store-sales growth across all the key markets in the country.

The healthy growth during the quarter was despite the Adhik Maas period falling in the quarter from the third week of July until the third week of August, a once in a 3-year phenomenon during which wedding jewellery demand tends to take a pause, Kalyan Jewellers said.

Non-south markets recorded higher revenue growth largely due to the greater number of showrooms launched in that region over the last twelve months.

The company said gross margin at the showroom level has been stable when compared to the same period in the previous financial year. As expected, given the higher share of revenue from franchised showrooms, blended gross margin has declined sequentially as well as when compared to the same period in the previous financial year, it added.

Meanwhile, ICRA expects a sustained improvement in Kalyan Jewellers performance over the medium term, driven by the company’s established market position and industry tailwinds in the form of market share gains for organised jewellery retailers.

The company had 15 franchisee stores as on March 31, 2023 and launched another 11 franchisee stores in Q1 FY2024. It plans to open 40-50 franchisee stores per year over the next 2-3 years. Although the adoption of this strategy is likely to result in some moderation in Kalyan Jewellers operating profit margin, its net profit margin and return on capital employed are expected to improve by this strategy. Given the initial stages of this business model and the low share of the same in the overall revenue at present, the benefits of the franchisee-led expansion strategy are likely to be more visible over the coming quarters, the rating agency said in its rationale.

ICRA further said it also notes the company’s plans to reduce the outstanding debt over the next 1-2 years, partly through the proceeds of liquidation of specified non-core assets and partly from operating cash flows, which is expected to positively impact its financial risk profile over the medium term.