A near-57% rally in Kalyan Jewellers over the past month may have led investors to ask whether the easy money has already been made. Jefferies doesn't think so.
The brokerage believes the organised jeweller is still in the early stages of benefiting from India's formalisation trend, leading it to initiate coverage with a 'Buy' rating and a target price of Rs 830, implying an upside of about 39% from current levels.
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In an initiation note authored by Vivek Maheshwari, Kedar Gattani and Rushabh Bhachawat, Jefferies said Kalyan has built a differentiated business by combining the trust of a neighbourhood jeweller with the scale of an organised retailer.
That, coupled with its franchise-led expansion model, strong balance sheet and rising cash flows, should continue to drive market share gains over the next few years.
Riding India's Formalisation Wave
Jefferies believes the biggest opportunity lies in the gradual shift of India's over $115-billion jewellery market, where nearly 60% remains unorganised, towards trusted branded players.
"Kalyan combines neighbourhood relevance with organised scale, creating a differentiated growth engine that drives share gains," the brokerage said, adding that regulatory changes and evolving consumer preferences should continue to accelerate formalisation.
The brokerage estimates Kalyan currently commands around 7% market share in India while operating a network of more than 500 showrooms globally.
Expansion Beyond South India
Jefferies highlighted Kalyan's Franchise-Owned Company-Operated (FOCO) model as a key competitive advantage.
Under this model, franchise partners invest in store capex and inventory, while Kalyan retains control over operations, pricing and customer experience. According to the brokerage, this allows rapid expansion with limited capital deployment while improving profitability and cash generation.
It noted that non-South India has now become the company's largest revenue contributor, with the FOCO model expected to be expanded further in southern markets as well.
The brokerage also pointed to Kalyan's hyper-local strategy, where product assortment, marketing and customer engagement are tailored to regional preferences. It added that initiatives such as the 'My Kalyan' network have strengthened customer acquisition, while wedding-focused offerings under the Muhurat brand position the company well in India's largest jewellery consumption segment.
Growth Backed By Strong Financials
Jefferies expects Kalyan to deliver a 21% earnings CAGR between FY26 and FY29, supported by continued showroom expansion, market share gains and stable international operations led by the Middle East.
It also expects the company to maintain a net cash balance sheet, aided by rising free cash flow, franchise-led expansion and monetisation of non-core assets.
The optimism comes after Kalyan Jewellers reported a strong June-quarter performance, with consolidated net profit rising 32% year-on-year (YoY) to Rs 349 crore, while revenue jumped 45.7% to Rs 10,589 crore.
At the operating front, earnings before interest, tax, depreciation and amortisation (EBITDA) increased 20.9% to Rs 632.5 crore, although EBITDA margin narrowed 120 basis points (bps) to 6% from 7.2% a year earlier.
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