HSBC Global Investment Research has selected Titan Company and Kalyan Jewellers as their preferred stocks among India's listed jewellery companies, citing growth opportunities in the sector. According to reports from The Economic Times, analysts Nihal Mahesh Jham, Pratik Gothi and Nupur Vyas highlighted the shift towards daily-wear jewellery as a key driver, noting that CaratLane, part of Titan, is the largest player in this segment followed by BlueStone. The analysts also emphasized the growing trend of large organised jewellery retailers outsourcing production of basic jewellery pieces while retaining higher design-focused manufacturing in-house. As per HSBC, this could benefit the wider jewellery value chain, with some companies in the segment recording revenue growth above that of organised jewellery retailers.
HSBC has retained its Buy rating on Titan Company with a target price of ₹5,550 per share. As reported by The Economic Times, the brokerage uses a P/E-based valuation with a forward target multiple of 60x, which is in line with the company's trading multiple since 2017 when the margin profile of its jewellery business moved back into double-digit territory. The target price implies 9% upside and is below the 69x average over the past five years, as analysts expect the jewellery business EBIT margin to remain below the 12-13% range seen in some years. According to HSBC, the target multiple also factors in the relatively better outlook for the jewellery segment within the overall consumption landscape. The analysts noted that despite the muted consumer environment, Titan is one of the few consumer companies with growth visibility.
HSBC has also retained its Buy rating on Kalyan Jewellers with a target price of ₹770 per share. According to The Economic Times, the brokerage uses a P/E-based sum-of-the-parts (SOTP) valuation methodology, with the company's average P/E since listing at 35x and the average over the past three years at 45x. HSBC has retained its target P/E multiple of 40x, which is at a discount to the three-year average. The forward P/E multiple of 40x is applied to Kalyan's India business TTM-June 2028 EPS estimate of ₹18.83, while a forward P/E multiple of 15x is used for Middle East and other businesses' TTM-June 2028 EPS estimate of ₹0.86. HSBC noted that the recent volatility in Kalyan's stock has increased its beta and risk profile, even as operational performance remains strong. As the company repays debt, concludes the sale of land holdings, and overall share price volatility abates, the analysts expect the multiple to re-rate.
HSBC's framework for evaluating jewellery companies includes comprehensive analysis of growth outlook, return on capital employed (RoCE), operating cash flow (OCF) and leverage trends, performance stability including hedging proportion, and promoter background and track record. According to HSBC, given that the jewellery industry is working-capital intensive, high growth could lead to weak operating cash flow, making trends in operating cash flow and return on capital employed more important than absolute levels. Both companies face several downside risks identified by HSBC analysts. Key risks for Titan include severe macroeconomic slowdown leading to lower discretionary spending, sharp correction in gold prices, failure to achieve jewellery revenue guidance, higher discounting weighing on margins, and conflict in the Middle East continuing to weigh on international operations. For Kalyan Jewellers, analysts flagged execution risk as franchisee stores may not be as profitable as expected, competition from higher competitive intensity, slower-than-expected network expansion, and high volatility in gold prices.
