Motilal Oswal Financial Services (MOFSL) has reaffirmed its 'BUY' recommendations for two prominent jewellery stocks: Titan Company Ltd and Kalyan Jewellers India Ltd. The brokerage firm highlighted their top picks due to industry-leading execution, superior capital allocation, and a consistent ability to compound earnings ahead of the broader consumer sector.
Why MOFSL is Bullish on Jewellery Stocks
MOFSL remains constructive on the Indian jewellery sector, identifying a significant "double tailwind" driving its growth. This includes the ongoing formalisation of the market, shifting consumers from unorganised to organised players, and increasing premiumisation. Well-capitalised companies like Titan and Kalyan Jewellers are expected to be the primary beneficiaries of these trends.
The organised jewellery retail segment in India has demonstrated robust structural growth. MOFSL's analysis of India-listed jewellery companies revealed a 34% revenue Compound Annual Growth Rate (CAGR) from FY22-26, and 22% over FY19-26, with total revenues reaching Rs 1.4 lakh crore. Store aggregates also expanded significantly, with a 22% CAGR during FY22-26 and 17% over FY19-26, growing from 661 stores in FY19 to 2,002 stores.
Double Tailwind Driving Growth
The strong growth trajectory is further supported by:
- Premiumisation: A rising demand for studded and lightweight jewellery.
- Store Expansion: A long runway for growth, as only 40-45% of the market is currently organised.
- Strengthening Balance Sheets: Companies are improving their financial health through asset-light formats and Gold Metal Loan (GML) strategies.
Margin Outlook and Working Capital
While MOFSL anticipates some near-term pressure on margins due to the increasing share of gold coins, they expect this to be partially offset over the medium term by a better product mix and improved profitability across other segments. Additionally, the permissible tenure for gold on lease has been extended from 180 days to 270 days, enhancing working capital flexibility for jewellers.
Target Prices for Titan and Kalyan Jewellers
Based on their positive outlook, MOFSL has assigned a target price of Rs 6,000 for Titan Company Ltd and Rs 800 for Kalyan Jewellers India Ltd. The brokerage also maintains a 'BUY' rating on P N Gadgil with a target price of INR 800, while remaining 'NEUTRAL' on Senco with a target price of INR 430.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.