Kalyan Jewellers Shares Drop 3% Despite 32% Surge in Q1 Net Profit Amid Margin Pressures.

Kalyan Jewellers experienced a notable decline in share value, slipping 3% to Rs 575 on the BSE, as recent quarterly earnings report highlighted margin pressures that overshadowed substantial profit growth. The company reported a consolidated net profit increase of 32% year-on-year (YoY), amounting to Rs 348.7 crore, supported by a 45.7% YoY surge in revenue from operations, which reached Rs 10,588.9 crore. Despite this encouraging revenue trajectory, challenges such as a higher proportion of exchanged gold and promotional offers have adversely impacted gross margins.

The operating performance showed resilience, with EBITDA rising 24.5% to Rs 632.5 crore compared to the same quarter last year. However, the gross margin pressures stemmed from a combination of factors, including the elevated exchange gold and a one-off gain associated with platinum and silver in the previous quarter. Additionally, an import duty hike resulted in a one-time gain of approximately Rs 41 crore in this quarter, further complicating the earnings outlook. The company also engaged in expanding its footprint, adding 12 new showrooms during the quarter, a slight increase from last year’s additions.

Looking forward, Kalyan anticipates mid- to high-single-digit growth in same-store sales, bolstered by its capital-efficient franchise-based expansion strategy. This approach is expected to elevate its return on capital employed (ROCE) from the current rate of 30.3%. Notably, the company intends to diversify its revenue streams by increasing its presence in non-South Indian markets, with plans to primarily open new showrooms outside the southern region.

Additionally, Kalyan Jewellers is poised to enhance its brand portfolio by accelerating the rollout of Candere showrooms, which feature lightweight, lifestyle-oriented jewellery. The introduction of new regional jewellery brands targeting localized designs is on the horizon, with the first expected to launch in FY27. Such strategic initiatives may serve to not only solidify Kalyan’s market position but also enhance consumer engagement and revenue growth in an increasingly competitive landscape.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)