Anindita Chatterjee
Updated on: October 7, 2024 7:32 am GMT
don’t buy from a trusted jeweller. Titan has managed to fill this gap exceedingly well and has positioned itself as one of the most trusted brands in the diamonds and jewellery space. This trust, along with its pan-India reach, unique designs, and economies of scale, has allowed Titan to earn margins that are almost twice the industry average, translating into significant wealth creation over the last couple of decades.
In contrast, Kalyan Jewellers appears to be struggling to achieve similar success. Despite trading at a high price-to-earnings (P/E) ratio of about 100 times its latest 12-month earnings, which exceeds even Titan’s P/E of 90 times, Kalyan Jewellers’ financial metrics are underwhelming. With operating margins of 7% compared to Titan’s 11%, and a net profit margin averaging merely 1.3% against almost 7% for Titan, Kalyan Jewellers lacks the pricing power and profitability that Titan possesses. Its return on equity (ROE), averaging close to 10%, is not just below Titan’s ROE of 25% but also beneath the threshold for a decent business, which raises questions about its investment attractiveness.
While Kalyan Jewellers is pursuing aggressive expansion largely through a franchise model and is taking steps to reduce debt, the key question remains whether these efforts can translate into improved profitability. Given the current price, the stock seems to be pricing in an overly optimistic future. If Kalyan Jewellers fails to meet these high expectations, it may lead to significant downside risks for investors.
People are hopeful about Kalyan Jewellers, especially since they have plans to grow. However, looking at how they have done in the past, it’s hard to say they can be as successful as Titan. Investors should be careful because the high hopes for the company don’t match the numbers we see. Happy investing!
