Stock Of The Day: Kalyan Jewellers Gains After Motilal Oswal Initiates 'Buy' — Analyst Views, Key Levels

Shares of Kalyan Jewellers India Ltd. surged over 5% on Wednesday after Motilal Oswal initiated coverage on the stock with a 'buy' rating, citing an average profitability of 41% over the next two fiscal year due to enhanced market footprint, cash flow and reduce debt.

The company has successfully shifted to a franchise model since fiscal 2023, adding 76 stores in the last fiscal with plans to add 80 more in fiscal 2025.

This transition, according to Motilal Oswal, enhances the jeweller's market footprint and cash flow, aiming to reduce Indian debt by Rs 600 crore over two years. With a notable studded jewelry ratio of 28% in fiscal 2024 and stable Middle East operations generating Rs 2,600 crore in revenue, Kalyan aims to further slash overall debt by Rs 700 crore.

Motilal Oswal expects an average growth of 29% in revenue, 26% in Ebitda, and 41% profit after tax from fiscal 2024 to fiscal 2026. Based on these strong projections, Motilal Oswal initiated coverage with a target price of Rs 525, reflecting a 23% upside and 45 times fiscal 2026 price-to-earnings ratio.

Kalyan Jewellers, a major player in India's jewelry retail sector with 217 stores nationwide, surged in trade today and touched an intraday high of 5.42%.

• Resistance level: Rs 447.85 a piece (June 19 intraday high)

• Support Levels: Rs 335.05 apiece (June 4 low)

Kalyan Jewellers, originating from Kerala, now operates in 23 states and a Union territory in India. Favorable industry dynamics for organised players such as Kalyan and Tanishq will drive store-led growth. According to Motilal Oswal, Kalyan’s success in non-southern markets boosts its confidence for faster expansion, leveraging the higher popularity and margins of studded jewellery (35% margin) compared to plain gold (11–12% margin).

Motilal Oswal views Kalyan Jewellers as a key player in India's organised jewelry market, leveraging its strong brand and extensive store network. The company's aggressive expansion plan into non-southern markets via franchising aims to boost margins and achieve 15-20% annual revenue growth. Forecasting a robust average growth of 29%, 26%, and 41% for revenue, Ebitda, and adjusted PAT, respectively, from March 2024 to March 2026.

"We project a potential return on equity enhancement from 14–15% to 20–22% in 2-3 years, driven by operating leverage. With a current 37 times fiscal 2026 price-to-earning ratio, the return on equity and return on return-on-invested-capital is estimated at ~23% and 16%, respectively.

Motilal Oswal as initiates coverage with a 'buy' rating and a target price of Rs 525 apiece.

Shares of the company were trading 2.29% higher at Rs 433.70 apiece as of 11:40 a.m., compared with a 0.15% decline in the benchmark Nifty. The shares had hit an intraday high of Rs 447 apiece.