Shares of Kalyan Jewellers jumped 5.4% to ₹447 apiece in today's early morning trade, while those of Senco Gold gained 2.6% to ₹1,055 apiece after domestic brokerage firm Motilal Oswal initiated coverage on these stocks with a 'buy' rating. The brokerage set a target price of ₹525 for Kalyan Jewellers and ₹1,300 for Senco Gold. Additionally, Motilal Oswal retained its 'buy' call on Titan, raising its target price to ₹4,150 apiece.
The brokerage is optimistic about the jewellery sector as it believes consumers are increasingly shifting towards organised players. In FY18, the jewellery market was valued at USD 48–50 billion, with the organized market accounting for a 20–22% share. From FY18 to FY24, the total market reported a CAGR of 9–10%, while the organized market registered a CAGR of over 17%. The past three years have been especially strong for the industry, which saw a 20%–30% value growth for the total and organized market segments.
Industry estimates cited by the brokerage project the jewellery market to achieve a 15–16% CAGR, reaching USD 145 billion by FY28. The organized market is expected to grow at over 20% CAGR, accounting for 42-43% of the total market.
Several factors are driving this rapid growth, including rising disposable incomes, an improved mix for regular wear beyond weddings and investments, enhanced product offerings (such as design and diamonds), trust-building through hallmarking, and a better buying experience at organized retail outlets.
Kalyan Jewellers is one of the largest jewellery retail chains in India, with a strong network of over 217 stores across the country. At first, the company focused more on the company-owned stores to establish its brand name, even in the newer markets. After achieving success, it has implemented a franchise model since 2023 and expanded to 76 stores by FY24.
The company is further leveraging its brand by extensively expanding across Indian markets, with 80 new stores being opened in FY25 through the franchise route. The asset-light expansion will generate the necessary cash flows to repay its debt in India ( ₹6 billion) over the next two years.
The studded ratio of 28% in FY24 was best in class and reflected the company’s understanding of evolving consumer trends, such as youth-led and non-traditional preferences. The Middle East business ( ₹26 billion; 36 stores) was steady in FY24.
The company aims to reduce its overall debt levels by ₹7 billion over the next two years. The brokerage projects a 29%/26%/41% revenue/EBITDA/PAT CAGR during FY24–26E.
The company is one of the most promising players in the organized retail jewellery market. The company has a pan-India presence with a strong network in the east region. It operates a total of 159 stores across India, with 93 company-owned stores and 66 franchise stores as of FY24.
The company holds a 4% market share in the eastern region, predominately in West Bengal, where 75% of its eastern region stores are located. It is further expanding its footprint in eastern markets and scaling up its network in other regions.
Senco aims to expand its consumer base (added three states and 11 cities during FY24) by focusing on lightweight jewellery and capturing the consumer trend of studded (a 250-bp gain in the studded ratio in the last three years to 11.4%).
In line with the formalisation in the jewellery market, the brokerage continues to see store expansion-led growth for SENCO (estimated addition of 34 stores during FY24–26E, taking the total to 193 stores).
The brokerage estimates a CAGR of 19%/20%/26% in revenue/EBITDA/adj. PAT over FY2426.
Titan Company, with its superior competitive positioning (in sourcing, studded ratio, youth-centric focus, and reinvestment strategy), has continued to outperform other branded players. The brand recall and business moat are not easily replicable; therefore, Tanishq’s competitive edge will remain strong in the category.
The store count reached 3,035 stores as of March 24, and the expansion story remains intact.
Titan’s EBITDA margin has been under pressure during FY24 owing to a lower studded mix. It will be critical to monitor the margin outlook amid intensifying competition. The non-jewellery business is also scaling up well and will contribute to growth in the medium term. The business currently accounts for 12% and 9% of revenue and EBIT, respectively.
The brokerage estimates a 17%/20%/25% revenue/EBITDA PAT CAGR during FY24–26E. Titan’s valuation is rich, but it offers a long runway for growth with a superior execution track record.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
