Kalyan Jewelers India Ltd. reported lower-than-expected Q2 numbers; consolidated revenue and EBITDA increased by 37.4 percent and 4.3 percent respectively, but PAT fell by 3.4 percent due to one-time loss deduction of customs duty.

Centrum Broking said that despite the volatility in gold prices, sustainable revenue momentum in the second quarter was due to strong customer traffic after the customs duty was reduced from 16 percent to 6 percent. A 39.2 percent growth in India business, a 23 percent growth in same-store sales in India, a 49 percent growth in the non-south compared to 31 percent in the south, and a strong share of 30 percent helped revenue growth happened.

Despite the increase in the number of FOCO stores, the management plans to increase profitability by divesting non-core assets, improving capital efficiency by making adjustments in TOT for newly appointed franchisees, reducing interest cost burden and converting a small number of owned stores under the FOCO model.

Centrum said Kalyan remains committed to reducing its debt by Rs 300 billion in FY25 and is further directed to reduce it by Rs 350-400 million in FY26 with additional cash flows.

“We think Kalyan’s strategy revolves around adding FOCO stores in markets outside the South and calibrated expansion gaining momentum in the Middle East/US region. Kalyan showcased the strategy of opening stores in non-South markets and helped improve the spiked rate. FOCO opportunity under Candere by focusing on offline stores “We are optimistic about the situation.”

With the lower margin, the brokerage cut Kalyan Jewelers’ earnings estimates for FY25 and FY26 by 19.4 per cent and 21.6 per cent respectively. It maintained its ‘ADD’ rating and revised its DCF-based target price to Rs 700. Risks: irrational competition; long term recovery
economy

Centrum said Kalyan is on track to reduce debt by Rs 300 billion in FY25 by converting a few of its stores into FOCO and increasing GML (gold metal loan) to reduce interest burden. Management has set store expansion guidance that is expected to add more than 80 stores in FY26.