Jewelry Sector - Transcending Tradition; Adorning Fashion: Motilal Oswals Thematic View

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Motilal Oswal Report

The jewelry sector has been experiencing a significant trend towards formalisation, with the organised market accounting for 36-38% of the total jewelry market, compared to ~22% in FY19. The total jewelry market reported ~8% revenue CAGR during FY19-24, reaching a market value of Rs 6,400 billion. The organized market clocked ~18-19% revenue CAGR while Titan, Kalyan Jewellers, and Senco Gold combined recorded ~20% revenue CAGR during FY19-24.

Towards the organised channel we are optimistic about the jewelry category and anticipate ongoing rapid shifts in consumer purchasing behavior, transitioning from unorganised/local to organised channels. Factors such as increasing ticket prices, enhanced shopping experiences, greater product variety, et al. are fueling this momentous trend.

Initiate coverage with a Buy rating on Kalyan Jewellers and Senco Gold

Kalyan Jewellers India Ltd. is one of the largest jewelry retail chains in India, with a strong network of over 217 stores across the country. The asset-light expansion (franchise-driven) will generate the necessary cash flows to repay its debt in India (Rs 6.0 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.

We model 29%/26%/41% revenue/Ebitda PAT CAGR during FY24-26E. Initiate coverage on Kalyan Jewellers with a Buy rating and a target price of Rs 525 (based on 45 times P/E on FY26E).

Senco Gold Ltd. is one of the most promising players in the organized retail jewelry market. The company has a pan-India presence with a strong network in the eastern region (store/revenue mix of 75%/ 80%). Senco operated a total of 159 stores across India, with 93 company-owned stores and 66 franchise stores as of FY24.

Senco Gold holds ~4% market share in the eastern region, predominately in West Bengal, where 75% of its eastern region stores are located. We model 19%/20%/26% revenue/Ebitda PAT CAGR during FY24-26E. Initiate coverage on Senco with a Buy rating and a target price of Rs 1,300, based on 35 times P/E on FY26E.

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