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Kalyan Jewellers India Ltd’s shares touched a new 52-week low on NSE on Wednesday. This was after the company announced its results for the fourth quarter of the financial year 2022 (Q4FY22). Consolidated revenue fell by 7% year-on-year (y-o-y) to Rs2,857 crore. Kalyan’s operations in Q4 were hindered due to the impact of the Omicron wave. Further, the geopolitical conflict resulted in volatility in gold prices, which dented demand as consumers tend to postpone their purchases awaiting stable prices.

The business in India saw 8% drop in revenue y-o-y where the non-south markets reported y-o-y growth, which was more than offset by fall in revenue in the south markets. Although, this is also a function of uneven growth performance in the base quarter. Note that the southern region constituted 62.8% of total India’s revenue, which accounted for 84% of overall consolidated revenues of the company.

The share of studded revenue rose to 24.3% from 22.3% in the year ago quarter. Stronger growth in non-south markets coupled with increasing share of studded revenue are natural tailwinds for Kalyan’s margin profile, note analysts at ICICI Securities. “We like the increased focus on low-value studded to uptrade new consumers," said analysts at ICICI Securities in a report on 12 May.

On the other hand, revenue in the Middle East remained flat y-o-y at nearly Rs425 crore. The management highlighted that consumer sentiment continues to remain firm.

Overall, consolidated gross margin rose by 52 basis points (bps) y-o-y to 15.6%. One basis point is 0.01%. Ebitda (earnings before interest, tax, depreciation and amortization) margin stood at 7.6%.

“Both Titan Co. and Kalyan reported slightly weak prints in Q4. Titan’s performance of flat revenues (on an adjusted basis) was slightly superior to Kalyan’s. Kalyan’s performance, though lagged Titan, needs to be seen in the context of lower store expansion benefit, which is now picking up," added the ICICI Securities report.

The jewellery maker added 17 stores (net) in FY22. It further plans to add 12-15 stores in India in FY23.

Going forward, investors should closely track the store expansion. Any disappointment on that front are key risks for the stock, which has declined by 12% so far this calendar year.

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