Kalyan Jewellers, Titan shares: 2 jewellery stocks to buy; target prices

MOFSL on Wednesday said it remained constructive on the jewellery sector and continued to prefer Titan Company Ltd and Kalyan Jewellers India Ltd as its top picks. It said the preference was driven by their industry-leading execution, superior capital allocation and sustained ability to compound earnings ahead of the broader consumer sector.

The brokerage said India’s organised jewellery retail remained one of the strongest structural growth stories. It added that its India-listed jewellery universe had registered a 34 per cent revenue CAGR during FY22-26, and 22 per cent over FY19-26, reaching Rs 1.4 lakh crore in revenue.

MOFSL said jewellery store aggregates in India had expanded at a 22 per cent CAGR during FY22-26, and 17 per cent over FY19-26, to 2,002 stores from 661 in FY19. It said this growth pointed to a strong store expansion trajectory as well as strong revenue growth, reflecting a healthy consumption trend. The universe had also registered 29 per cent Ebitda  and APAT CAGR each during FY22-26, compared with 24 per cent and 27 per cent, respectively, during FY19-26.

Double tailwind

“We see a double tailwind for the sector: formalisation (unorganised to organised) and increasing premiumisation, with well-capitalised players as the primary beneficiaries,” MOFSL said.

It said the strong growth was being compounded by premiumisation, including studded and lightweight jewellery, a long store-expansion runway as only 40-45 per cent of the market is organised, and strengthening balance sheets through asset-light formats and GML.

Kalyan, Titan target prices
MOFSL said the increasing share of gold coins is expected to put pressure on margins in the near term. However, over the medium term, it said this should be partly offset by a better product mix and profitability improvements across other segments. It also noted that the permissible tenure of gold on lease had been extended from 180 days to 270 days, improving working capital flexibility.

“We continue to prefer Titan and Kalyan Jewellers as our top picks; we have a BUY rating on both with a target price of Rs 6,000 and Rs 800, respectively. We reiterate our BUY rating on P N Gadgil with a TP of INR800 and remain NEUTRAL on Senco with a TP of INR430,” MOFSL said.