Shares of Kalyan Jewellers India Ltd plunged 7 per cent in Thursday’s trade, taking its recent losing run to the fourth straight day. While the prospects for the jewellery maker stays strong, there are concerns over valuations after a 212 per cent rally on the counter in a year.
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ICICI Securities has downgraded the stock to ‘Add’ from ‘Buy’ even as it felt Kalyan Jewellers continued to deliver revenue outperformance (32 per cent YoY) compared to peers (21 per cent Titan Company Ltd), driven by franchise-led retail expansion (31 per cent YoY), adding that same store sales growth (SSSG) performance was decent (at 8 per cent YoY against 22 per cent for Titan Company).
The extension of the FOCO model in Middle East and in Candere format shall be ROIC accretive, it said.
“We like the focus on recruiting new customers (36 per cent share in Q2). At current valuation, we revise our rating to ADD (from BUY) with target of Rs 360,” the brokerage said.
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The firm reported a consolidated net profit of Rs 134.87 crore in the September quarter compared with Rs 105.92 crore in the corresponding quarter last year. Revenue, Kalyan Jewellers said, jumped 27.11 per cent for the quarter to Rs 4,414.53 crore from Rs 3,472.91 crore in the same quarter last year.
“We maintain our revenue/Ebitda estimates for FY24 and FY25; modelling revenue, Ebitda and PAT CAGRs of 25 per cent, 18 per cent and 29 per cent, respectively over FY23-FY25E. We downgrade our rating to ADD with a DCF-based revised target price of Rs 360 (was Rs 300). At our trade the stock will trade at a multiple of 47 times FY25E EPS. Key risks: delay in showroom expansion and potentially higher competitive intensity in core south India markets,” ICICI Securities said.
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The stock was trading 6.82 per cent lower at Rs 307 over its previous closing of Rs 329.50 on BSE.
