Stock Of The Day: Kalyan Jewellers—Analyst Views, Key Levels To Watch

Within the consumer discretionary and retail sector, the jewellery segment, represented by companies like Kalyan Jewellers India Ltd., remains resilient amid consumption slowdowns, according to Citi Research.

Targeting mid-to-high-income and affluent consumers, jewellery companies have experienced minimal impact. Recent demand trends, if maintained, can lead to increased market share and higher revenue growth for these companies, it said.

As a result, Kalyan Jewellers stands out as a top pick in this segment, according to industry analysis.

Resistance level: Rs. 427.85 a piece (Record high)

Support Levels: Rs. 357.4 apiece (one-week low)

Shares of Kalyan Jewellers rose as much as 3.1% during the day to an all-time high of Rs 427.85 apiece on the NSE.

Citi maintains a 'buy' rating on the stock with a target price of Rs 480 apiece, backed by a 24% discounted earnings per share as compared to Titan.

Risks include consumer sentiment, competition and gold-price fluctuations, while upside potential lies in consumer traction, expansion plans and favourable market dynamics.

Variances in business models or capital structures have an impact on growth rates, cash flows and return profiles. Despite Kalyan Jewellers' financial performance showing some volatility in recent years, they maintain the belief that there is significant potential for the stock to experience a re-rating, according to Citi.

It said there is ample room for the stock to re-rate, provided there is steady execution.

Demand for jewellery remains robust in terms of value, but there has been a year-on-year decline in volume, according to Citi's analysis.

This trend is attributed to heightened competition from both national and local players. However, the studded-jewellery segment has been affected by a combination of lower diamond prices and rising gold costs, it said.

The demand for jewellery has shown resilience, particularly with notable growth in January and February compared to March. The slight decline in March, partly attributed to seasonal factors and a brief period of inauspiciousness, has not dampened the overall positive trend. However, the growth is primarily attributed to fluctuations in gold prices, while there's a noticeable year-on-year decrease in volume.

Intensifying competition from both national and local players has eliminated trust as a distinguishing factor in the jewellery market, thanks to hallmarking and Hallmark Unique Identification regulations. Despite heightened competition in old gold exchanges, local jewellers tend to offer lower rates compared to national players. However, most jewellers now offer similar making charges, leveling the playing field in this aspect.

The jewellery industry's revenue mix has shifted due to changes in diamond and gold prices. With diamond prices correcting over the past year and gold prices rising, there has been a decrease in demand for studded jewellery, making gold the preferred product. Studded jewelry now comprises approximately 40% of the revenue mix, while high-value solitaire diamonds account for 10–12% of sales.

Street view suggests a bullish stance for Kalyan Jewellers. The average target price as per consensus suggests Rs 410.5 apiece.