The Indian jewellery market is navigating choppy waters, thanks to record-high gold prices denting consumer demand and squeezing profit margins. But amid the turbulence, Motilal Oswal sees a shining opportunity in PN Gadgil Jewellers (PNG). The brokerage firm has given a firm “BUY” rating on PNG, setting a target price of INR 950—suggesting a potential upside of nearly 75% from current levels.
P N Gadgil Jewellers: A Diamond in the Rough?
Stock Performance at a Glance
- Current Price: INR 550 (as of February 2025)
- Target Price: INR 950 (as per Motilal Oswal)
- Allotment Price: INR 480
- 52-Week High: INR 844
- 52-Week Low: INR 495
- Recent Performance: Hit a 10% upper circuit post strong Q3 earnings
After soaring to a lifetime high of INR 844, PNG has retraced by about 35%, now hovering close to its IPO allotment price. For investors looking to grab a solid stock at a reasonable valuation, this might be a golden opportunity.
PN Gadgil Q3FY25: A Blockbuster Quarter
PNG delivered a stellar Q3FY25 performance, riding on strong festive demand and an aggressive expansion strategy:
- Revenue: INR 2,435 crore (+23.5% YoY)
- EBITDA: INR 129 crore (+37.2% YoY)
- Net Profit: INR 86 crore (+49% YoY)
- EBITDA Margin: 5.3%, reflecting a 50 basis points increase year-over-year.
- Net Profit Margin: 3.5%, marking a 60 basis points rise year-over-year.
- Store Count: 48 stores, with nine new additions in Q3FY25
- Expansion Plan: 5 new stores planned by March 2025; 25 more in FY26
Now You’re wondering what’s driving this growth? – PNG’s diversified sales channels. The retail segment segment is ruling and contributed a 77% in the total revenue. The jewellery firm’s revenue from e-commerce and franchise sales have skyrocketed—up 97% and 87% YoY, respectively. Clearly, PNG isn’t just riding the jewellery market wave; it’s making waves of its own.
Growth Trajectory: Bigger, Bolder, Better
PNG’s ambitious expansion plans suggest it isn’t slowing down anytime soon. By FY25-end, the company aims to operate 53 stores, with a bigger push in FY26 to add another 25 outlets. Here’s how they plan to break it down:
- 8 COCO Stores: (Company-Owned, Company-Operated)
- 7 FOCO Stores: (Franchise-Owned, Company-Operated)
- 10 ‘LiteStyle by PNG’ Stores: Targeting younger buyers with trendy designs
Tailwinds Propelling Growth
Several factors are working in PNG’s favour:
Festive Demand: Jewellery purchases surged during Navratri and Diwali, with sales jumping 18% and 52.7%, respectively.- Same-Store Sales Growth (SSSG): A strong 25.7% growth indicates solid demand despite macroeconomic headwinds.
- E-Commerce Surge: Online sales nearly doubled during the festive season, signalling a shift in consumer buying habits.
- Gold Hedging Strategy: PNG effectively manages gold price volatility, safeguarding its margins.
- Diamond Jewellery Push: With gold prices skyrocketing past INR 86,000 per 10 grams, consumers are pivoting towards diamonds—an area where PNG is rapidly expanding.
What’s the Long-Term Play?
Motilal Oswal expecting that PNG’s revenue, EBITDA, and net profit will grow at a CAGR of 23%, 31%, and 29% respectively from FY24-FY27. The key drivers for growth are:
- Expansion into newer markets
- Increasing retail presence in high-demand regions
- Strengthening of digital sales ecosystem
- Effective cost-control practises
Challenges and the Road Ahead
It’s not all smooth sailing for the jewellery sector. Sky-high gold prices and increasing gold leasing rates have put pressure on margins. However, PNG is tackling these challenges head-on with strategic initiatives like old jewellery exchange programs and product diversification to cater to evolving consumer preferences.
Final Verdict
Investors seeking growth and looking to invest in India’s expanding jewellery market may consider PN Gadgil. The company is trading near its issue allotment price, presenting a compelling opportunity to join the wave.
PN Gadgil made its stock market debut on 17 September 2024, with its IPO listing at a premium of 65.27%. Despite the ongoing market correction, the stock has been performing well. After Motilal Oswal’s recent projections, investors may target an upside of 75%. However, investing in IPOs may associate some risks so investors should conduct thorough research before investing.
For more details related to IPO GMP, SEBI IPO Approval, and Live Subscription stay tuned to IPO Central.