Brokerage firms remain bullish on Kalyan Jewellers India following the company's strong March quarter print. Despite volatile gold prices and a seasonally weak quarter, the company reported an 18.4% rise in consolidated revenue to ₹3,382 crore.
In India, the company experienced a 17% growth in revenues, primarily fueled by several factors. These include a significant increase of 38% in new customer additions, a remarkable 38% growth in non-south regions compared to only 4% in the south, a notable 37% increase in the share of studded products, reaching 28.3%, and a surge in footfalls during the wedding season, contributing to the overall growth, said brokerage firm Centrum Institutional Research.
Middle East revenues increased by 29% to ₹550 crore, driven by strong consumer sentiments. In this region the company added two new stores, bringing the total number of stores to 33.
Despite facing higher ad spends, employee costs, and other expenses, the company managed to achieve a 17.5% growth in EBITDA, reaching ₹260 crore, settling an EBITDA margin flat at 7.6%.
In Q4FY23, the company's adjusted PAT showed a significant increase, rising to ₹95 crore compared to ₹72 crore in the same period of the previous year, representing a growth of 30%.
Furthermore, the company's consolidated revenue for FY23 reached ₹14,071 crore, demonstrating a growth rate of over 30% compared to the previous year's revenue of ₹10,818 crore. The consolidated profit after tax (PAT) for FY23 expanded to ₹432 crore from ₹224 crore recorded in FY22.
The company added 12 new stores in the March quarter, reaching a total of 182 stores. Among these, 149 stores are located in India, while the remaining are situated in the Middle East.
Further, with 15 FOCO (Franchise Owned Company Operated) stores in operation, Kalyan has raised its guidance to add 52 stores in FY24E and 1 pilot store each in the South India & Middle East region.
With the increasing number of FOCO stores, Kalyan aims to enhance its profitability by reducing debt over the course of three years. This will be achieved through the divestment of movable and immovable assets, driving a capital-efficient franchise model.
The company also plans to lower its interest costs, converting a few owned stores to the FOCO model and releasing capital to reinvest in revenue growth, according to the brokerage firm.
In light of growth levers, Centrum Institutional Research maintained its 'buy' rating on the stock with a DCF-based target price of ₹165 apiece, which hints towards an upside potential of 52.7% from the stock's previous closing price.
Likewise, ICICI Securities also retained a 'buy' call on the stock with a DCF-based unchanged target price of ₹160 apiece.
"We like the developments on improving governance and RoCE, including the company's commitment on the franchisee business (plans to open 52 non-south stores in FY24, convert and expand COCO to FOCO in the south and middle east)."
"In addition, the company's improving capital and investment discipline includes divestment of non-core assets (including corporate aircraft) with plans to reduce gross debt by ₹3–4 billion in FY24, and plans to accelerate capital deployment outside South India," said ICICI Securities.
06 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
