Kalyan Jewellers shares jump 15% in 2 days as target prices go up to Rs 900. Should you buy?

Kalyan Jewellers shares surged 15% in two sessions, touching a 52-week intraday high of Rs 702 on Thursday, after brokerages raised their price targets following a strong Q2 performance and an upbeat festive season outlook.

Jefferies increased its target price to Rs 900 from Rs 830 and retained a Buy rating. JM Financial raised its target to Rs 796 from Rs 772, while Motilal Oswal retained its Buy call with a target of Rs 800.

At Thursday’s high, Jefferies’ target implied around 28% potential upside, while the targets of JM Financial and Motilal Oswal implied gains of about 13% and 14%, respectively.

The rally followed Kalyan’s reported consolidated net profit of Rs 427 crore for Q2 of FY27, up nearly 64% from Rs 261 crore a year earlier. The profit was aided by a one-time exceptional gain of Rs 73.5 crore from the sale of an investment property.

However, brokerages said the underlying performance was also strong after adjusting for one-offs.

“Consolidated revenue growth was strong at 31% year-on-year, despite the festive shift,” Jefferies said, adding that normalised EBITDA grew more than 25% and profit before tax rose more than 30%. Adjusted profit after tax stood at around Rs 330 crore, it said.

Also Read | Kalyan Jewellers Q2 Results: Net profit jumps 64% YoY to Rs 427 crore, revenue rises 31%Kalyan’s consolidated revenue rose 31% year-on-year to Rs 10,323 crore. India revenue, excluding bullion, grew about 27%, driven by same-store sales growth of nearly 20%.

The company’s South India same store sales growth was about 19%, while the non-South business grew 21%. Brokerages said this indicated volume-led growth, as gold-price inflation during the quarter was in the single digits.

“Volume growth is clearly visible,” Motilal Oswal said, noting that India’s same-store sales growth of about 20% came against single-digit gold-price inflation. The brokerage said demand momentum remained strong in the first 40 days of the third quarter.

Management retained its aspiration of around 10% same-store sales growth and at least 25% revenue growth for fiscal 2027. It also said the third quarter had started strongly, with healthy traction during Navratri, Dhanteras and the weekends that followed.

Wedding demand, which accounts for about 60% of revenue, remains an important support for the company’s outlook.

Kalyan added 11 net stores in India during the quarter, taking its Kalyan showroom count to 365. Candere added nine stores, taking its network to 138. The total network stood at 546 stores.

The company plans to add 84 Kalyan stores, 50 Candere stores and five stores under its newly launched ATM brand during fiscal 2027, with openings weighted towards the second half.

The franchise-led, or FOCO, model contributed about 59% of India revenue. Jefferies said the asset-light expansion model could support growth while limiting incremental capital requirements.

Kalyan also fully repaid its non-gold-metal-loan debt in India during the first half of fiscal 2027. JM Financial said consolidated net cash excluding gold-metal loans rose to Rs 830 crore from Rs 340 crore in fiscal 2026, while total net debt including gold-metal loans declined to Rs 2,870 crore.

The reported profit growth was boosted by the land sale gain and a Rs 52 crore benefit related to the increase in customs duty. After adjusting for these items, brokerages still estimated adjusted profit growth between 28% and 42.8%, depending on the treatment of inventory gains and exceptional items.

Margins, however, remained under pressure. Motilal Oswal said adjusted gross margin contracted 80 basis points year-on-year to 11.9%, while adjusted EBITDA margin fell 20 basis points to 5.8%.

The Middle East business also remains a mixed picture. Revenue grew 11% and same-store sales rose 12%, but profit after tax declined 19% because of higher finance costs. Talks for a larger FOCO partnership in the region are still under way.

Should you buy?

The brokerages remain constructive. Jefferies values Kalyan at 40 times estimated December 2028 earnings and sees a base-case target of Rs 900. Its upside scenario is Rs 1,100, while its downside scenario is Rs 550.

The investment case rests on volume-led same-store growth, store expansion, continued formalisation of jewellery retail, market-share gains and balance-sheet deleveraging. But investors must also account for the sharp two-day rally, margin pressure, gold-price volatility, competitive intensity and regulatory risks related to gold imports, taxation and gold-metal loans.

At Rs 702, the stock has already moved closer to the near term targets of Rs 796-Rs 800. The highest target of Rs 900 still offers upside, but that view depends on Kalyan sustaining strong festive and wedding season demand, delivering its store expansion plans and converting revenue growth into steady margin and earnings expansion.

(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimershere)