Kalyan Jewellers' shares declined nearly 3% today despite a 'Buy' initiation from ICICI Securities with a ₹680 target. While the company reported 46% revenue growth for Q1 FY27, investors reacted cautiously to a contraction in profit margins driven by rising promotional costs and a shifting product mix.
Shares of Kalyan Jewellers India traded lower today, shedding nearly 3% following the release of its first-quarter financial results for the fiscal year 2027. Even though ICICI Securities initiated coverage on the stock with a 'Buy' recommendation and a target price of ₹680, the market reacted with caution, prioritizing the operational challenges highlighted in the quarterly report over the brokerage's long-term optimism.
For the quarter ended June 30, 2026, the company posted revenue of ₹10,589 crore, reflecting a 46% jump compared to the same period last year. Profit after tax (PAT) also rose by 32% to reach ₹349 crore. Despite these strong headline growth figures, investor attention shifted toward profitability metrics, which signaled some pressure.
Impact of Margin Pressure on Sentiment
The primary concern for the market appears to be the contraction in EBITDA margins, which narrowed by approximately 100 to 120 basis points. This pressure was largely driven by an increase in promotional spending, higher volumes of gold exchange—where customers trade old gold for new items—and a shift in the product mix. Specifically, there was a lower contribution from higher-margin studded jewellery in new outlets. Essentially, while the company is driving significant top-line growth, the costs associated with customer acquisition and changes in product preference have put temporary pressure on bottom-line margins.
ICICI Securities remains optimistic about the company's long-term trajectory, projecting a 25% annual growth in earnings per share (EPS) over the next two fiscal years. This positive outlook is primarily built on two pillars: the aggressive expansion of Franchise Owned Company Operated (FOCO) showrooms and a disciplined debt-reduction strategy. The company is making significant progress in this area and expects to fully repay its non-Gold Monetization Loan debt by September 2026, which would improve its financial health and interest costs.
Looking ahead, investors are likely tracking how the company navigates the current environment. The jewellery sector faces inherent risks, including potential volatility in demand due to high gold price inflation and the broader impact of recent import duty changes. The company’s ability to manage its margins while balancing store expansion, promotional activity, and a changing product mix will be the key factor determining market sentiment in the coming quarters.