Multibagger stock: Shares of Kalyan Jewellers India Ltd are up 945 per cent in the past three years but HSBC believes there is more steam left. The stock has potential to deliver 17 per cent potential upside over the prevailing price, HSBC's fresh target price suggests. Kalyan's capital light expansion has continued and its exponential growth will likely prevent any multiple de-rating, the foreign brokerage said.
Despite the Kalyan’s stock rallying 8 times in the past two years, HSBC said it is still midway into its value creation journey. HSBC said it sees see several long-range catalysts for Kalyan Jewellers and Titan’s journey as a useful guide, as it raised its target price on the stock to Rs 810 from Rs 600 and suggested a 'Buy' rating on the counter. The brokerage shared seven reasons for its optimistic view on the Kalyan Jewellers India stock.
First, Kalyan is still in the midway of its value creation journey, with 217 stores that is less than half of Titan’s, HSBC said. It said there is clear potential to quadruple this count in this decade. "Hence we see industry leading revenue growth continuing making Kalyan an appealing compounding opportunity," the foreign brokerage said.
Second, Kalyan has emerged as an entrenched national brand (like Titan), which differentiates Kalyan from other regional rivals and gives it a natural right for the pan India capital light expansion, the brokerage said.
Third, the aspirational yet value positioning makes Kalyan less prone to disruptive competition. To an extent, HSBC feels Kalyan is somewhat of a disruptor itself that is reshaping value proposition in the organised jewellery segment.
Fourth, having scaled up the Kalyan format through the franchise route, HSBC sees opportunity for Kalyan to scale up Candere (studded jewellery), emulating Caratlane of Titan. HSBC said a successful scale up would act as a catalyst for stock performance.
Fifth, HSBC sees two long-range sources of margin tailwinds. Having achieved large scale, there is clear incentive for Kalyan to capture larger value by opening owned stores instead of allocating to franchise partners in lucrative micro markets, which would trigger the cycle of gradual long-range margin expansion which should be a very sensitive lever for value creation.
Besides, it said, a successful track-record the terms of trade such as gold loan interest may start to come down as well.
Lastly, HSBC believes Kalyan Jewellers' valuations look appealing if pitted against the high growth of other consumer opportunities. At FY26 PE of 56 times, Kalyan still looks attractively valued, relative to other structural high growth companies of equivalent economics such as DMart and Titan.
"A growing investor base has also led to a fall in the hurdle rate for Kalyan as ROE has risen consistently and growth appears structural," HSBC said.
