ICICI Securities has kept its 'BUY' rating on Kalyan Jewellers with a Rs 680 price target, citing the potential of its new brand, Akshaya Thanga Maligai (ATM). The new format aims to capture value-conscious buyers in Tamil Nadu to drive growth. Investors should monitor recent margin pressure despite strong revenue gains.
ICICI Securities has maintained its 'BUY' recommendation for Kalyan Jewellers India, setting a target price of Rs 680 per share. The brokerage’s outlook is driven by the strategic launch of 'Akshaya Thanga Maligai' (ATM), a new regional brand aimed at capturing a different customer segment. The first store under this brand was recently opened in Chennai, Tamil Nadu.
This initiative targets value-conscious consumers who typically shop at unorganized local jewellery stores. By offering regional designs and a pricing structure tailored to this segment, Kalyan Jewellers aims to expand its reach without changing the premium positioning of its parent brand. Tamil Nadu is a critical market, accounting for approximately 15% of India's total jewellery demand. To build immediate local trust, the company has partnered with popular Tamil actor Sivakarthikeyan as the brand ambassador for ATM.
Financial performance remains a mixed picture for investors to consider. In the first quarter of fiscal year 2027, Kalyan Jewellers reported a robust 46% increase in revenue and a 32% jump in profit compared to the previous year. However, profit margins faced pressure during the same period. The gross profit margin contracted by 194 basis points, falling to 11.9%. This decline was primarily attributed to a change in the product mix, including a higher portion of recycled gold and various exchange offers.
On the balance sheet front, the company continues to focus on strengthening its position. Management has indicated that non-GML debt is expected to be fully cleared by September 2026, which would reduce interest costs and improve cash flow flexibility.
While the expansion into regional brands offers a new growth path, there are factors investors should track. The ATM brand is currently in its early stages as a pilot project. Its long-term ability to maintain healthy unit economics, similar to the established Kalyan stores, remains to be seen. Additionally, the company faces intense competition from local, established jewellers in these specific regional markets. Macroeconomic risks, such as volatile gold prices and potential changes in import duties, also continue to impact the broader jewellery retail sector.
For shareholders, the primary monitorables will be the initial sales performance of the ATM stores, the company’s ability to stabilize profit margins, and the progress of its ongoing debt reduction plan.