Target: ₹121

CMP: ₹81

We recently interacted with various business teams of Kalyan Jewellers to assess fundamental drivers for growth. We reckon, Kalyan has inherent advantage to its business model - hyperlocal strategy, generating strong enquiries given its solid understanding on local taste and demand for designs.

Further our interaction with teams running, hallmarking center, wholesale manufacturer and ‘My Kalyan’ displayed confidence on generating strong consumer demand working closely with wedding eco-system (about 20 per cent of revenues).

Management alluded resilient business momentum and improving SSSG driven by footfalls across geographies, yet it remains upbeat on doubling store count in three years in non-south markets driven by own stores and FOCO (50-60) improving its studded jewelry ratio. The management said A&P spend to remain at about 1.8 per cent of sales yet expects FY23 could witness strong revenue momentum and improved profitability led by pent up demand.

We tweak our earnings and maintain Buy, with a revised DCF-based target price to ₹121 (implying 27.5x FY24 EPS) from earlier ₹101.

Risks: irrational competition; prolonged recovery in the economy, leading to lower demand for jewellery; rising gold prices.