Why Nuvama turned bullish on Sky Gold ahead of Diwali? Sees 32% upside

Nuvama Institutional Equities has initiated coverage on Sky Gold and Diamonds stock with a ‘Buy’ rating, citing strong volume and margin growth going ahead. The brokerage has given a target of ₹450 per share, implying 31.5 per cent upside from Friday’s close at ₹342.1 per share. 

 

On Friday, Sky Gold and Diamond’s share price closed 1.5 per cent higher on BSE at ₹342.1 per share. In comparison, Sensex was up 0.4 per cent at 82,500.82.

 

In the past one year, Sky Gold's shares have gained 11 per cent, as compared to Sensex’s rise of 0.68 per cent.   READ STOCK MARKET LIVE UPDATES TODAY

 

Why is Nuvama bullish on Sky Gold ahead on Diwali?

Poised for robust volume growth

Nuvama anticipates the company to record a 39 per cent revenue compound annual growth rate (CAGR) over FY25–28, supported by strong volume growth from existing clients (driven by their store expansion), addition of new clients, and a growing focus on exports.

 

Sky Gold achieved 39 per cent revenue over FY15–25, driven by a sharp increase in volumes, expanding client base, aggressive store openings, and healthy same-store sales growth (SSSG), the brokerage noted.

 

This growth was further supported by favourable gold price trends, which boosted profitability and market penetration. Sky Gold’s significant unutilised capacity — 57 per cent as of Q1FY26 — following recent expansions and acquisitions, positions it well to capitalise on the aggressive growth plans of national and regional jewellers, Nuvama said.

 

In addition, scalable capacity and efficient operations enable a rapid ramp-up to meet rising demand. Recent acquisitions have enhanced both capacity and capability, helping the company enter new categories and reach new clients. Management is also focusing on increasing the share of its advanced gold business, which is expected to strengthen profitability and improve working capital efficiency.  ALSO READ | DMart Q2 show: Analysts flag margin strain despite steady revenue growth

Margins and working capital to improve

Nuvama expects Sky Gold’s profitability and working capital cycle to improve going ahead. This will be driven by a higher share of the advanced gold model—a low working-capital segment—primarily from new clients such as Caratlane and Novel (Aditya Birla’s jewellery division), along with a stronger focus on exports, which offer superior margins due to favourable gold pricing.

 

Additionally, the export business provides better payment terms, further strengthening the company’s financial position. Overall, Nuvama projects a 40-basis-point (bps) expansion in PAT margin over FY25–28E, supported by a 50-bps improvement in Ebitda margin stemming from a 50-bps rise in gross margin. This is expected to translate into a 44 per cent CAGR in profit after tax (PAT) over FY25–28E.

Key risks

The brokerage also flagged Sky Gold’s weak free cash flow generation as a concern, noting that the company’s rapid growth and rising working capital needs—amid elevated gold prices—require frequent capital infusion. Another key risk, Nuvama pointed out, is high client concentration, with more than 40 per cent of revenue coming from the top ten customers.