Motilal Oswal Financial Services has reiterated its BUY rating on Kalyan Jewellers Ltd, holding its target price steady at Rs700, based on 35 times its projected March 2028 earnings — a target that implies an 18% upside from the stock's current market price of Rs591.

Revenue Roars Ahead, Margins Take a Hit

Kalyan's consolidated revenue surged 46% year-on-year to Rs105.9 billion, landing almost precisely on the brokerage's own estimate of Rs105.7 billion. The India business was the standout, growing 47% year-on-year and delivering a striking 28% same-store sales growth — a figure management attributed to sustained wedding-season demand, with the southern markets posting 30% growth against 27% in the rest of the country.

Online-first arm Candere continued its rapid climb, more than doubling revenue to Rs1.41 billion from Rs660 million a year earlier, and swinging to a modest profit of Rs21 million versus a loss of Rs100 million in the same quarter last year.

The profitability picture was less flattering. A one-time gain of Rs410 million, stemming from a customs duty hike from 6% to 15%, flattered the headline numbers, but once stripped out, the India business's gross margin slipped 280 basis points year-on-year to 10.8%. Management pinned the erosion on three factors: a higher share of exchanged gold accepted at board rates, promotional incentives tied to the exchange campaign, and the absence of a one-off gain in platinum and silver sales that had flattered the year-ago quarter. EBITDA margin for the India business contracted 200 basis points to 5.1%, well short of the brokerage's 6.7% estimate.

India Versus the Middle East: A Side-by-Side Look

The Middle East franchise put in a healthier margin performance relative to expectations, with EBITDA climbing 24% year-on-year even as gross margin contracted 200 basis points to 12%. No new stores opened in the region this quarter, though management confirmed discussions are underway with potential investors for a larger franchise-owned, company-operated (FOCO) partnership.

The Gold Recirculation Gambit

Store Expansion, Debt Reduction, and a New Regional Brand

• Kalyan plans to open 84 new showrooms in FY27 — all under the asset-light FOCO model — alongside 50 additional Candere stores, with most additions weighted toward the second half of the year.
• The company unveiled its first regional jewellery brand, Akshaya Thangam, tailored exclusively for the Tamil Nadu market, with the first showroom set to open in Chennai on August 21, 2026.
• Management reiterated its target of becoming debt-free excluding gold metal loans by the end of September 2026, having already repaid Rs5.6 billion of non-gold-metal-loan debt in FY26.
• The company has signed agreements to divest two non-core real estate assets for a combined Rs1.02 billion, with completion expected this quarter.

Estimates Trimmed, Rating Unchanged

Motilal Oswal has trimmed its EPS estimates by 3-4% for both FY27 and FY28 to reflect the softer near-term margin trajectory, while continuing to model a 24%/18%/23% revenue/EBITDA/PAT CAGR through FY26-28. Management, for its part, expects the margin pressure to prove temporary, guiding that full-year FY27 profit-before-tax margins should broadly track FY26 levels.

The Bottom Line for Investors

Kalyan's growth engine — franchise-led expansion now contributing over half of revenue, deepening penetration into non-Southern markets, and a still-healthy wedding-demand pipeline into July — remains firmly intact even as near-term margins absorbed a hit from strategic gold-recirculation incentives. Motilal Oswal's BUY rating and Rs700 target price stand, offering 18% upside, with the brokerage framing the quarter's margin miss as a temporary cost of a longer-term de-risking strategy rather than a structural concern.

Sources: Motilal Oswal Financial Services — Kalyan Jewellers 1QFY27 Results Update, August 4, 2026; Company filings.