Thangamayil Jewellery Soars 7% After HDFC Securities Recommends Buying with a ₹2,500 Target Price

Thangamayil Jewellery Ltd (TJL) shares surged nearly 7% on September 2 after HDFC Securities began covering the stock with a “buy” rating and set a target price of ₹2,500 per share.

By 9:20 am, the stock was trading at ₹2,175 on the BSE, up 7% from the previous close, while India’s Sensex rose by 0.25% to 82,575 points.

HDFC Securities believes that Thangamayil Jewellery, a key player in Tamil Nadu, will see strong growth between FY24 and FY27. They expect the company’s revenue to grow by 26% annually, EBITDA by 33%, and profit after tax by 41%. This growth is driven by the company’s focus on rapid store expansion, value-for-money products, and access to affordable capital.

The brokerage compares TJL to “D-Mart of Tamil Nadu’s jewellery sector,” focusing on fast inventory turnover and reasonable margins, unlike other jewellery companies that focus on high operating margins with slower inventory turnover.

HDFC Securities also anticipates a significant increase in Thangamayil Jewellery’s return on equity (ROE), expecting it to rise from 18% in FY23 to 32% in FY27, outpacing Titan, the leader in the organized jewellery sector.

They also predict that Thangamayil Jewellery will open 30 new large stores between FY25 and FY27, nearly doubling its current store area, and boosting sales by 26% annually.

The jewellery industry has been formalizing faster since hallmarking norms were introduced in June 2021, and the Union Budget’s reduction of import duty from 15% to 6% in July 2024 is expected to further benefit the sector.

Thangamayil and other organized jewellers are well-positioned to capture more of the Tamil Nadu market as customers move away from small, traditional jewellers. These organized retailers offer better customer experiences, larger product ranges, lower making charges, and access to cheaper financing, which makes them more attractive to customers.