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Demand conditions for Kalyan Jewellers India Ltd. seem to be encouraging. So far, there has been no considerable impact on consumption following the government’s move to raise import duty on gold, said Ramesh Kalyanaraman, executive director, Kalyan Jewellers. Even so, how demand pans out in the coming days would be a crucial factor to watch out for.
The company remains one of the key beneficiaries of the shift in demand from the unorganised to the organised segment.
“We expect organised jewellery sector to benefit from, (a) formalisation, (b) pent up demand from deferred weddings in CY21, (c) store addition in tier-2/3 markets, and (d) online jewelry picking up consumer preferences for fast fashion/ daily wear segment," said analysts at Centrum Broking in a report on 7 July.
Kalyan Jewellers released its business update for the June quarter (Q1FY23). It clocked a massive 115% year-on-year (y-o-y) revenue growth in India operations during the quarter under review. Recall that Q1FY22 was impacted by the second wave of covid. Even so, revenue growth stood at 22% when compared to Q1FY20, according to the company. Also, revenue in India in the last twelve months were about 35% higher when compared to FY20 revenue.
India operations’ gross margin improved y-o-y due to better portfolio mix but were largely unchanged sequentially. In Q4FY22, the measure was over 15%.
In the Middle East, the company continued to see strong traction in demand primarily led by recovery in economic and tourist activity. In Q1, revenue grew 65% year-on-year.
Overall, consolidated revenue grew 105% y-o-y. Investors are pleased as shares of the company have risen nearly 3% so far post the announcement.
Going ahead, the jeweller aims to open more stores in markets, other than southern India, and this would be a significant driver for margin expansion, according to the company. In Q1, Kalyan Jewellers opened three stores in non-south and one in the Middle East taking the total count to 158 as on Q1 end.
The studded mix is also higher in non-south markets. It aims non-south and south markets to equally contribute to revenue by FY25. Currently, the ratio is at 35:65. This would enable a 2% growth in the gross margin.
To be sure, rise in gold prices and increasing competition could be key risks for the stock, which is about 25% lower from its 52-week high seen on 10 November. Further, investors would do well in closely tracking store expansion.