Kalyan Jewellers India Downgraded to 'Hold' by MarketsMOJO Due to High Valuation

Kalyan Jewellers India, a leading player in the diamond and gold jewellery industry, has recently been downgraded to a 'Hold' by MarketsMOJO on November 26, 2024. This decision was based on various factors such as the company's healthy long-term growth, positive financial results, and technical indicators. One of the main reasons for the 'Hold' rating is the company's consistent growth in net sales and operating profit, with an annual rate of 26.63% and 38.30%, respectively. Additionally, Kalyan Jewellers India has declared positive results for the last six consecutive quarters, with its operating cash flow and dividend per share reaching their highest levels at Rs 985.56 Cr and Rs 1.20, respectively. From a technical standpoint, the stock is currently in a mildly bullish range, with multiple indicators such as MACD, Bollinger Band, KST, DOW, and OBV showing bullish signals. Moreover, the promoters of the company have increased their stake by 2.31% in the previous quarter, indicating high confidence in the future of the business. Kalyan Jewellers India has also shown consistent returns over the last three years, outperforming the BSE 500 index in each of the last three annual periods. With a market cap of Rs 72,485 crore, it is the second-largest company in the sector and constitutes 16.97% of the entire industry. Its annual sales of Rs 21,358.97 crore account for 5.44% of the industry. However, with a ROCE of 13.7, the stock is currently trading at an expensive valuation with a 9.5 enterprise value to capital employed. Despite this, the stock is still trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 110.89%, its profits have only risen by 19.9%, resulting in a PEG ratio of 5.8. In conclusion, while Kalyan Jewellers India has shown strong growth and positive financial results, the current valuation of the stock may not be justified. Hence, MarketsMOJO has downgraded the stock to a 'Hold' and advises investors to carefully monitor its performance before making any investment decisions.