Shares of Kalyan Jewellers and Senco Gold experienced notable gains in early morning trade today after domestic brokerage firm Motilal Oswal initiated coverage on both stocks with a ‘buy’ rating. Kalyan Jewellers‘ shares rose by 5.4% to ₹447 apiece, while Senco Gold saw a 2.6% increase to ₹1,055 apiece. Motilal Oswal set a target price of ₹525 for Kalyan Jewellers and ₹1,300 for Senco Gold. Additionally, the brokerage firm retained its ‘buy’ call on Titan, raising its target price to ₹4,150 apiece.
Optimism in the Jewellery Sector
Motilal Oswal’s bullish outlook on the jewellery sector is driven by a significant consumer shift towards organized players. In FY18, the jewellery market was valued at USD 48–50 billion, with the organized sector holding a 20–22% share. From FY18 to FY24, the total market experienced a compound annual growth rate (CAGR) of 9–10%, while the organized market saw a CAGR of over 17%. The last three years have been particularly strong for the industry, which reported a 20%–30% value growth in both total and organized market segments.
Projected Market Growth
Industry estimates suggest the jewellery market will achieve a 15–16% CAGR, reaching USD 145 billion by FY28. The organized market is expected to grow at over 20% CAGR, representing 42-43% of the total market. Factors contributing to this rapid growth include rising disposable incomes, an improved mix of jewellery for regular wear beyond weddings and investments, enhanced product offerings, trust-building through hallmarking, and a superior buying experience at organized retail outlets.
Kalyan Jewellers: Strategic Expansion and Debt Reduction
Kalyan Jewellers, one of India’s largest jewellery retail chains, boasts a strong network of over 217 stores nationwide. Initially focusing on company-owned stores to establish its brand, Kalyan transitioned to a franchise model in 2023, expanding to 76 stores by FY24. The company plans to open 80 new stores in FY25 through the franchise route, an asset-light expansion expected to generate necessary cash flows to repay its ₹6 billion debt in India over the next two years.
Kalyan’s studded jewellery ratio of 28% in FY24 is a testament to its understanding of evolving consumer trends, particularly among the youth. The company’s Middle East business also remains steady, contributing ₹26 billion from 36 stores. The brokerage projects a 29%/26%/41% CAGR in revenue/EBITDA/PAT for Kalyan Jewellers during FY24–26E.
Senco Gold: Expanding Presence and Capturing Trends
Senco Gold is recognized as a promising player in the organized retail jewellery market, with a strong presence in the eastern region of India. Operating 159 stores nationwide, with 93 company-owned and 66 franchise stores as of FY24, Senco holds a 4% market share in the eastern region, predominantly in West Bengal. The company is expanding its footprint in eastern markets and other regions, adding three states and 11 cities during FY24.
Senco aims to attract more consumers by focusing on lightweight jewellery and capturing the trend towards studded pieces, reflected in a 250-basis point gain in the studded ratio over the last three years to 11.4%. The brokerage forecasts a CAGR of 19%/20%/26% in revenue/EBITDA/adj. PAT for Senco over FY24–26E.
Titan: Sustained Competitive Edge
Titan Company maintains its strong competitive positioning in the jewellery sector through superior sourcing, a high studded jewellery ratio, a youth-centric focus, and a robust reinvestment strategy. Titan’s extensive network reached 3,035 stores as of March 2024, and its expansion continues.
Despite facing EBITDA margin pressures in FY24 due to a lower studded mix, Titan’s non-jewellery business is growing, currently accounting for 12% and 9% of revenue and EBIT, respectively. The brokerage estimates a 17%/20%/25% CAGR in revenue/EBITDA/PAT for Titan during FY24–26E, citing a long runway for growth and a superior execution track record.
Motilal Oswal’s optimistic outlook on Kalyan Jewellers, Senco Gold, and Titan reflects confidence in the organized jewellery sector’s growth prospects. Investors are advised to consult certified experts before making investment decisions based on these recommendations.
