Jewellery stocks have delivered glittering returns in the last few months amid hopes of a strong demand this festive season. September quarter business updates posted by Titan Company and Kalyan Jewellers have been taken positively by investors.
Kalyan Jewellers said India's standalone operations recorded revenue growth of approximately 14 per cent in the September quarter, despite a strong base. Titan Company, on the other hand, said its jewellery division saw an 18 per cent YoY growth in the September quarter.
Titan Company, late Rakesh Jhunjhunwala's biggest stock bet, is up over 44 per cent since its July 2022 low. Kalyan Jewellers stock, on the other hand, has zoomed almost 78 per cent from its May 22 lows.
"Kalyan Jewellers has almost doubled in value since July this year and large-cap jewellers stock Titan has also rallied around 30 per cent on festive anticipation. Between these two stocks, Titan is the larger one with a Rs 2.3 lakh crore market cap compared to only Rs 10,000 crore of Kalyan Jewellers but still Kalyan Jewellers trades at a much lower valuation multiple than Titan, which makes it really interesting," Sonam Srivastava, Founder at Wright Research told Business Today.
Srivastava said that the consistency of profit generation by Titan is more attractive in an environment where cash is king.
"Both of these stocks are expected to give a good quarter. We are not left wanting for choice. A lower-valued Kalyan Jewellers wins on the valuation front, but Titan has a stronger brand presence and scale. Irrespective of anything, Diwali is the perfect time to indulge in these stocks, Srivastava added.
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According to Anuj Jain, Research Head and Co-Founder at Green Portfolio, Titan is trying to diversify the business away from Jewellery which stands currently at 88 per cent of revenue – to Watches, Eye care and other businesses. Kalyan is still predominantly a jewellery player.
"Margin profile differs widely with an operating profit margin (OPM) of Titan at 12-13 per cent and that of Kalyan at 7-8 per cent. The three-year sales growth for Titan is at 13 per cent and that of Kalyan is at 3 per cent. On parentage also Titan, with Tata at the helm, will always be preferred. That does not mean that titan is coming cheap. Titan is trading at a price-to-earnings (PE) multiple of 80 against a PE of 27 for Kalyan," Jain said.
He added that Titan will perform better in future because of the rising level of income in India and more and more people preferring bigger brands. Titan commands a clear faith in the minds of consumers. Also, the future plans are robust. Newer entries into Saree/ apparel and accessories might add to future growth as well, he said.
Brokerage firm Motilal Oswal said Titan's runway for growth is long, with a market share of nearly 6 per cent.
Unlike other high-growth categories, the competitive intensity from organised and unorganised peers in jewellery is considerably weaker, it said, adding that the structural investment case for Titan is intact.
The brokerage firm has a target of Rs 2,970 on Titan, signalling an upside of over 13 per cent.
On the other hand, HSBC initiated coverage on Kalyan Jewellers on October 3 with a 'buy' rating and a target of Rs 125. At 11:30 am, the shares of were trading 2 per cent lower at Rs 95.50 on BSE.
The brokerage firm said Kalyan plans to aggressively build out its jewellery stores in higher-margin markets outside its home base of South India. If executed well, this can trigger structural return on equity (ROE) expansion and result in a stronger earnings growth trajectory.
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