Top 3 Stocks to Watch in India’s Booming Jewelry Sector
Jewelry has long been a cornerstone of Indian tradition, with its impact even extending to the stock market. In today’s blog post, we’ll dive deep into India’s jewelry sector and explore the top three stocks in this industry. But first, let’s understand the dynamics of the sector before analyzing these stocks.
Understanding India’s Jewelry Sector
India’s jewelry sector is projected to grow significantly in the coming years. The total addressable market (TAM) for the jewelry sector is valued at $80 billion in FY24 and is expected to reach $145 billion by FY28, growing at a compound annual growth rate (CAGR) of 16%. The demand primarily comes from wedding jewelry, comprising 60% of the jewelry purchases.
Geographical Demand & Trends
Southern India accounts for 40% of the total demand, followed by the western and northern regions. Meanwhile, the eastern part of the country was once dominated by local, unorganized jewelers but has seen a shift toward organized players like Tanishq, Kalyan, and Senco.
Supportive Regulatory Changes
Government policies, such as demonetization and cashless transactions, have also positively impacted the sector. Additionally, hallmarking of jewelry became mandatory in 2021, ensuring quality and transparency for consumers.
Key Parameters for Top Stock Selection
To identify the top three stocks in the jewelry sector, we selected companies based on the following parameters:
- Market capitalization exceeding ₹10,000 crores
- Highest operating margin in the industry
- Hedged exposure to gold prices
- Studded ratio higher than the industry average
- Strong interest coverage ratio of more than 3x
- Three-year sales and profit growth exceeding 25%
1. Titan Limited: The Industry Leader
Titan, backed by renowned investor Rakesh Jhunjhunwala, is India’s leading lifestyle-oriented business. Titan dominates in the jewelry, watches, eyewear, and fashion accessories segments.
Key Financial Metrics
- Trailing 12-month revenue: ₹25.2 billion
- Profit: ₹20.6 billion
- The same-store sales growth (SSSG) for Titan’s jewelry division was 3% in Q1FY25.
Growth Drivers
Titan’s growth is driven by its expansion in international markets, particularly in the Gulf Cooperation Council (GCC), North America, and Singapore. The company’s focus on studied jewelry and high-value products ensures a strong margin, especially during the wedding season, which accounts for 21% of its jewelry sales.
Challenges
Titan faces challenges such as competition from organized players, rising competition from other brands, and regulatory risks associated with sovereign gold bonds.
2. Senco Gold: Eastern India’s Largest Organized Player
Founded in 1994, Senco Gold is an established brand with a strong presence in Eastern India. The company operates 165 stores, with its expansion driven by its franchise model.
Business Model
Senco’s stores are operated under two models:
- Company Owned, Company Operated (COCO)
- Franchise Owned, Company Operated (FOCO)
The asset-light model of franchise stores has been pivotal in their growth, allowing for rapid expansion with minimal capital investment.
Key Financials
- Revenue: ₹26.4 billion (trailing 12 months)
- Operating margin: Increased from 5% to 8%
- Profit growth: Driven by low material costs and increasing studied jewelry ratio
Senco’s management has provided a revenue growth forecast of 18-20% and profit growth of 15-18% for FY25.
3. Kalyan Jewelers: A Pan-India Presence
Kalyan Jewelers is a household name in the jewelry business, with 241 showrooms across India and 36 showrooms in the Middle East. The company has captured a 6% market share in the organized jewelry sector.
Financial Performance
- Revenue: ₹28.1 billion (trailing 12 months)
- Profit: ₹28.2 billion
Kalyan’s same-store sales growth (SSSG) is consistently high, and its focus on studied jewelry, which offers higher margins, is a major contributor to its profitability.
Growth Strategy
Kalyan is focusing on expanding its market share in non-southern regions of India while further increasing its SSSG and growing its franchise model.
Risks
The company’s stock valuation is high, with a P/E ratio of 116x, which is a concern for investors. Additionally, rising competition from other organized players may require increased marketing spending.
Conclusion: Growth and Competition in the Jewelry Sector
The jewelry sector in India is booming, with Titan, Senco, and Kalyan Jewelers emerging as key players. While Titan’s international expansion and brand strength remain unparalleled, Senco is growing fast through its franchise model. Meanwhile, Kalyan continues to capture market share with its focus on studied jewelry and regional expansion.
These companies stand to benefit from regulatory support, rising consumer demand, and increasing adoption of organized jewelry retail. However, they also face challenges like competition and regulatory risks.
Where do you buy your jewelry from? Let us know in the comments below!
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Disclaimer: This content is for educational purposes only and should not be considered a buy or sell recommendation. Always do your own research before making any investment decisions.