Kalyan Jewelers India Ltd reported second-quarter figures below expectations, with consolidated revenue and Ebitda up 37.4 percent and 4.3 percent, but PAT fell 3.4 percent due to a one-off loss linked to the reduction of customs duties.

Centrum Broking said that despite the volatility in gold prices, the sustained revenue momentum in the second quarter was due to strong footfall following the reduction of customs duty from 16 percent to 6 percent. India business growth of 39.2 percent, India same-store sales growth of 23 percent, non-south growth of 49 percent versus 31 percent in the south and share studded market share of 30 percent contributed to revenue growth.

Despite the increase in the number of FOCO stores, the management intends to improve profitability by disinvesting non-core assets, improving capital efficiency by adjusting the TOT for newly appointed franchisees, reducing the burden of interests and converting a few owned stores under the FOCO model.

Centrum said Kalyan remained committed to reducing its debt by Rs 300 crore in FY25 and was further geared towards reducing its debt by Rs 350-400 crore in FY26 with additional cash flow.

“We believe Kalyan’s strategy revolved around adding FOCO stores in non-south markets and calibrated expansion in the Middle East/US region which is gaining momentum. Kalyan demonstrated that its strategy of opening stores in non-south markets helped improve the nail ratio. With a focus on offline stores under Candere, we are optimistic about FOCO opportunities,” he said.

By a lower margin, the brokerage cut its earnings estimates for Kalyan Jewelers for FY25 and FY26 by 19.4 percent and 21.6 percent, respectively. It retained its “ADD” rating and revised DCF-based target price of Rs 700. Risks: irrational competition; prolonged recovery in
the economy

Centrum said Kalyan is on track to reduce its debt by Rs 300 crore in FY25 by converting a few clean stores into FOCO and increasing GML (gold metal loan) to reduce interest burden , Centrum said. Management maintained its store expansion forecast, which is expected to add more than 80 stores in FY26.