Kalyan Jewellers India Ltd. has received UBS's 'buy' at coverage initiation on the back of five primary reasons including industry tailwinds, unique positioning, secular high growth among others.
On initiation, UBS noted that Kalyan has emerged as a pan-India jeweller, broadly emulating Titan's footprint in its network rollout, while standing out with its hyper-local value proposition. With target price set at Rs 900, the brokerage sees 46% upside in the stock from its current market price (CMP) of Rs 601.15.
UBS said that Kalyan Jewellers' shares have grown six-fold between fiscal 2022 and fiscal 2026, but still trade at a 45% discount to rivals like Titan while revenue has grown at one of the highest compound annual growth rate among organised jewellers (35%.)
"We expect both revenue and earnings to compound at c23% each over the next five years, as the multiple re-rating continues. Initiate at Buy with a PT of Rs 900. We see another 46% upside in the stock," UBS outlined in its note.
Five Reasons Why Kalyan Bagged UBS' Bullish Initiation
1. Significant industry tailwinds: Titan and Kalyan are among the key beneficiaries of the structural shift in India's $80 billion jewellery industry which is growing at a c10% CAGR and is fast transitioning to the organised segment. The organised segment accounts for 35% of the market and is growing at 15-20% CAGR.
2. Capital-light model: Kalyan has unlocked the capital-light FOCO model (franchise-owned company-operated stores), which is scaling up consistently adding 70-80 stores a year, fuelling high growth and rising return on capital.
3. Unique positioning: The company pursues a hyper-local strategy as a huge chunk of its of inventory is tailored to local tastes and at value pricing, while the rest of the range is aspirational. This strategy has helped it deliver consistent market share gains from the unorganised market.
4. Secular high growth: UBS expects 23% revenue CAGR over the next five years, with upside risk if the new value format brand in southern India also scales up significantly.
5. Current valuation: UBS thinks that Kalyan Jewellers' shares current valuation is very appealing, and leaves more room for further re-rating in the future.
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