Titan vs Kalyan Jewellers: What Q1 sales indicate about demand and which stock to buy

Synopsis

India’s gold jewellery sector faced multiple challenges in Q1FY27, including inflation concerns, higher interest rate expectations and the Adhik Maas period impacting wedding-related demand. Despite these pressures, Titan and Kalyan Jewellers reported strong business updates, supported by resilient jewellery demand, store expansion and growth across domestic and international markets.

The gold jewellery industry entered FY27 facing a two-pronged challenge. Soaring oil prices, rising inflation concerns and renewed bets on higher interest rates amid the West Asia crisis coincided with the once-in-three-years Adhik Maas period, which typically weighs on wedding-related jewellery demand.

Despite these headwinds, India's two largest listed jewellery retailers, Titan and Kalyan Jewellers, delivered robust first-quarter business updates, easing concerns over what many had expected to be a weak quarter.

The Tata Group firm reported a 41% year-on-year rise in its consumer businesses during the June quarter, supported by robust jewellery demand, an expanding retail network and strong growth in its international operations.

Its domestic business grew 37% year-on-year during the quarter, taking the total store count to 3,517. Jewellery remained the largest contributor, with the segment posting 39% growth over the year-ago period. Titan attributed the performance to healthy festive demand and strong sales during Akshaya Tritiya.

The jewellery business added 33 stores on a net basis during the quarter, taking the total to 1,227. Within the segment, Tanishq, Mia, Zoya and beYon together registered 39% growth, while CaratLane recorded 42% growth. Titan said relatively stable gold prices supported buyer growth, which remained in the early double digits, while average ticket sizes increased in the high double digits.

Kalyan Jewellers reported an estimated 38% year-on-year growth in consolidated revenue during the first quarter of FY27. Its international business recorded revenue growth of about 35% compared with the same period last year.

The company's digital-first jewellery platform, Candere, posted revenue growth of approximately 112% year-on-year. During the quarter, Kalyan Jewellers opened 12 showrooms in India, while Candere added five new stores.

International brokerage Nomura said the "strength show continues, all businesses fire up well" for Titan Company and maintained its Buy rating with a target price of Rs 5,000 (9% upside). "We view Titan as a key beneficiary of the rising affluent and elite income population in India, with sales growth at 1.5-2x GDP of India over the medium term," the brokerage said.

Nomura noted that Titan is one of the faster-growing domestic jewellery players, having increased its market share from 5% in FY19 to 8% in FY24. It expects the company to continue outpacing industry growth and increase its market share to 10% by FY28F, driven by expansion into Tier 2, Tier 3 and Tier 4 towns and a continued shift of consumers from unorganised players, which account for 60% of the industry, to organised retailers offering correct caratage, better designs and an improved shopping experience.

ICICI Securities has raised Titan's EPS estimates for FY27 and FY28 by 2.6% and 2%, respectively, to reflect better revenue growth in Q1FY27. The brokerage models revenue, EBITDA and PAT CAGR of 19%, 24% and 26%, respectively, over FY26-28E. It has maintained an Add rating with a DCF-based revised target price of Rs 5,250 (14% upside), compared with Rs 5,100 earlier. Key risks include an irrational competitive environment and sustained weakness or deterioration in the macro environment leading to a slowdown in demand.

Citi is outright bullish and suggests the stock could double to Rs 750. The brokerage expects the company's franchise-led expansion strategy to support revenue growth going forward. It also believes the asset-light model will aid deleveraging and improve return on capital employed (ROCE).

ICICI Securities has assigned a Buy rating to Kalyan Jewellers with a target price of Rs 670 (89% upside). The brokerage believes the company's robust Q1FY27 performance despite headwinds reflects resilient underlying jewellery demand. While store expansion and the formalisation of the industry reinforce its positive stance, it said any structural downward correction in natural diamond prices remains a key concern.

ICICI Securities reiterated its expectation that Kalyan will maintain its strong growth momentum in FY27, with a modelled standalone jewellery revenue CAGR of around 22%. It has marginally increased EPS estimates for FY27 and FY28 to reflect better revenue growth in Q1FY27 and models revenue, EBITDA and PAT CAGR of 19%, 16% and 24%, respectively, over FY26-28E. The brokerage maintained its Buy rating with an unchanged DCF-based target price of Rs 670.

Key risks include delays in showroom expansion and potentially higher competitive intensity in its core South Indian markets.

Investors will now watch for management commentary, festive season demand and execution of expansion plans in the coming quarters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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