Kalyan Jewellers India Ltd. share price target

Strong revenue growth, though at declining margins

Kalyan Jewellers (KALYANKJ)’s consolidated revenue grew 37% YoY to INR60.7b (in line). The Indian business delivered 39% YoY revenue growth, driven by store additions.

Kalyan’s consolidated revenue grew 27% YoY to INR55.3b (in line) in 1QFY25. India business posted 29% YoY revenue growth, driven by store.

Kalyan reported outperformance in 1Q with 31% YoY (consol) revenue growth driven by execution of accelerated franchisee-led store expansion. SSSG of 15% was healthy. Gross and EBITDA margins declined largely due to increased contribution of lower margin franchisee revenues.

Kalyan reported a good performance in 4Q with 18% YoY (consol) revenue growth (in line results). Gross margin of India business improved by 50bps YoY to 15.7% (largely due to better mix – non-south and studded partly offset due to franchisee stores). Non-south markets now contribute ~39% (vs ~34% in FY22).

Kalyan reported a good performance in 3Q with 13% (consol) revenue growth. Gross margin of India business was flattish at 16.1% (largely due to increase in competitive pressure on gold prices). Non-south markets now contribute ~43%. We note (1) higher share of non-south revenues and (2) increased studded sales are natural tailwinds for Kalyan’s margin profile and the benefit should continue to accrue for next few years.

We like the developments on improving governance and RoCE (1) commitment on the franchisee business, (2) improving capital and investment discipline including divestment of non-core assets (including corporate aircraft)

Kalyan Jewellers continues to benefit from (1) robust demand environment (even vs pre-covid) – early signs of festive demand are also encouraging and (2) continuous thrust on store expansion

We believe Kalyan is delivering well on its key markers of (1) improving incremental return ratios and (2) expansion outside its core market of south India. We like the (1) commitment on the franchisee business, (2) improving capital and investment discipline and (3) potential outside south India.

Kalyan reported a decent operating performance in 4Q. Stronger growth in nonsouth markets (base were different though) and higher studded aided good gross margin print (15.6%) – we note that these are natural tailwinds for Kalyan’s margin profile and the benefit should continue to accrue for next few years. We like the increased focus on low-value studded to uptrade new consumers.

Kalyan Jewellers India Limited IPO Note Issue Open: Mar 16 Mar 18, 2021 Price Band: Rs. 86 87 (Discount of Rs.8 for eligible employees) *Issue Size: 135,057,471 eq shares (Fresh issue 91,954,023 + Offer for sale of 43,103,448 eq sh) including employee Reservation of 2,29,885 eq sh Issue Size: Rs. 1161.5 1175.0 cr Reservation for: QIB Upto 50% eq sh Non Institutional atleast 15% eq sh Retail atleast 35% eq sh

Following hyperlocal strategy to cater to wide range of segments Jewellery consumption patterns in India are highly localised with customer preferences varying significantly by region. The company strives to appeal to a broad base of customers via a multi-faceted hyperlocal strategy by deploying initiatives such as: a) localisation of product portfolio, b) localisation of brand communication and marketing and c) localisation of showroom experience for customers. Localisation strategy, combined with large scale of operations, allows it to cater to a wide range of customers...

poor inventory turns 3) Loss in Middle east operations despite high through put and own store real estate 4) Poor capital allocation with Rs2.7bn investment on Helicopters and close to Rs3bn on Land, buildings and remain anemic in the medium term. Although the stock at ~30xFY23E EPS...

poor inventory turns 3) Loss in Middle east operations despite high through put and own store real estate 4) Poor capital allocation with Rs2.7bn investment on Helicopters and close to Rs3bn on Land, buildings and remain anemic in the medium term. Although the stock at ~30xFY23E EPS...

Kalyan Jewellers India Limited (KJIL) was incorporated in 1993. The company is one of the largest jewellery companies in India based on revenue as of March 31, 2020. The company was established by their founder and one of their Promoters, T.S. Kalyanaraman.Kalyan Jewellers has expanded to become a pan-India jewellery company, with 107 showrooms located