Thangamayil Jewellery - Steady As A Rock: HDFC Securities

HDFC Securities Institutional Equities

We recently met Thangamayil Jewellery Ltd. management and came back positive about its medium-term growth prospects. We reiterate our high-conviction Buy with a target price of Rs 2,550 (Dec-26 EPS). Key takeaways from our meeting are as follows:

1. Jewellery demand remains strong, underpinned by tailwinds of hallmarking, the recent customs duty reduction from 15% to 6%, and aggressive store expansion. However, in the near term, the demand environment is challenging due to the sharp surge in gold prices.

2. Store addition momentum is expected to sustain as the company plans to add eight-10 stores annually over the medium term. The flagship Chennai store (9000-10,000 sq ft) is likely to commence operations from Jan 2025.

3. Adjusted Ebitda margin to see at least ~100bps improvement from 5.2% in FY24 to 6.2%, led by improving mix, operating leverage, and higher making charges on gold jewellery.

4. Risk capital for store addition is well supported by the announced rights issue of up to Rs 6 billion and increased contributions from the Digi Gold app/advanced purchase scheme.

Key risks to our call:

1. increased volatility in gold prices could impact consumer demand and

2. mainstream jewellery branded players could foray into tier-II/tier-III/tier-IV cities, where Thangamayil primarily operates.

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