Shares of Thangamayil Jewellery Ltd. saw a significant decline of over 7% on Wednesday, closing at Rs 4,214.70. This downturn followed the release of its second-quarter (Q2 FY27) financial results, which, despite showing robust sales growth, revealed stagnant profitability.
Total sales for the September quarter surged by 40% year-on-year to Rs 2,381 crore. Retail sales, a major component, increased by 41% to Rs 2,303 crore compared to Rs 1,636 crore in the same period last year. Gold jewellery sales led this growth, rising 41% to Rs 2,119 crore, while non-gold products, including silver and diamonds, saw a 36% increase to Rs 184 crore. Wholesale sales also contributed, growing 13% to Rs 78 crore.
Profitability Challenges Amid Sales Growth
Despite the impressive topline expansion, Thangamayil Jewellery's profitability remained largely unchanged. Profit after tax (PAT) for Q2 FY27 stood at Rs 59 crore, matching the figure from Q2 FY26. The company reported a noticeable contraction in key margin metrics:
- Gross Profit Margin: Declined to 9.60% from 11.25% in the prior year.
- EBITDA Margin: Contracted to 4.95% from 6.48%.
While reported gross profit did increase by 20% to Rs 221 crore and EBITDA rose 8% to Rs 114 crore, these gains did not keep pace with the substantial increase in sales, leading to the margin squeeze. Profit before tax (PBT) showed a modest 3% increase, reaching Rs 80 crore.
Factors Impacting Margins
The company attributed some of the pressure on its margins to external market dynamics. Fluctuations in the prices of gold and silver played a role, alongside inventory profit realization, which accounted for Rs 28.54 crore (12.9%) of the reported gross profit during the quarter. Furthermore, the ongoing uncertainty in West Asia was flagged as a factor impacting gold and silver prices and subsequently affecting expatriate remittances in its key operating regions within Tamil Nadu, potentially influencing purchasing power.
Looking at the first half of FY27, total sales for Thangamayil Jewellery increased by 55% to Rs 5,043 crore, with profit after tax rising 38% to Rs 144 crore. Same-store sales growth demonstrated strong performance at 35.93%, significantly up from 10.31% in the year-ago period.