Sky Gold & Diamonds Ltd Upgraded to Buy on Strong Financials and Valuation Appeal

Quality Assessment: Strong Operational Efficiency and Consistent Growth

Sky Gold & Diamonds continues to demonstrate exceptional operational quality, underscored by a high Return on Capital Employed (ROCE) of 17.03%, which is a key driver behind the upgrade. This figure reflects the company’s ability to generate significant returns from its capital base, outperforming many peers in the gems, jewellery and watches sector. The management’s efficiency is further validated by the company’s track record of delivering positive results for ten consecutive quarters, a testament to its stable and sustainable business model.

Financially, the company has exhibited remarkable growth in key metrics. Net sales have surged at an annualised rate of 61.04%, while operating profit has expanded even more impressively at 120.18%. Net profit growth of 53.68% in the recent quarter and a 90.85% increase in PAT over the latest six months to ₹110.58 crores highlight the company’s strong earnings momentum. These figures underscore the company’s ability to convert sales growth into bottom-line profitability effectively.

Additionally, the operating profit to interest ratio stands at a healthy 5.68 times, indicating robust coverage of interest expenses and financial stability. This strong financial foundation supports the company’s quality grade upgrade and bolsters investor confidence in its long-term prospects.

Valuation: Attractive Pricing Relative to Peers and Growth Potential

Despite its strong financial performance, Sky Gold & Diamonds is trading at a discount compared to its peers’ historical valuations, making it an attractive proposition for investors seeking value. The company’s Enterprise Value to Capital Employed ratio is a modest 3.3, signalling reasonable pricing relative to the capital invested in the business.

Moreover, the company’s Price/Earnings to Growth (PEG) ratio stands at a low 0.3, indicating that the stock is undervalued relative to its earnings growth potential. This is particularly notable given the company’s profit growth of 130.2% over the past year, even as the stock price has declined by 2.15%. Such a disparity suggests that the market has yet to fully price in the company’s earnings acceleration, presenting a compelling entry point for investors.

However, it is important to note that the stock has underperformed the broader market over the last year, with a negative return of -2.15% compared to the BSE500’s 8.76% gain. This underperformance may reflect short-term market sentiment or sector-specific headwinds, but the valuation metrics imply significant upside potential if the company’s fundamentals continue to improve.

Financial Trend: Sustained Growth and Institutional Confidence

The financial trend for Sky Gold & Diamonds remains very positive, supported by strong quarterly results and sustained growth over multiple periods. The company’s net sales for the latest six months reached ₹2,615.70 crores, growing at 75.33%, while PAT surged by 90.85% to ₹110.58 crores. This consistent upward trajectory in earnings and sales underpins the upgrade in the financial trend rating.

Institutional investors have also increased their stake by 2.87% over the previous quarter, now collectively holding 12.44% of the company’s shares. This growing institutional participation is a significant vote of confidence, as these investors typically possess superior analytical resources and a longer-term investment horizon. Their increased involvement often signals expectations of continued strong performance and can provide stability to the stock price.

Long-term returns further reinforce the company’s growth credentials. Over a three-year period, Sky Gold & Diamonds has delivered an extraordinary return of 1,067.98%, vastly outperforming the Sensex’s 37.97% gain. Over five years, the stock’s return of 3,336.36% dwarfs the Sensex’s 72.66%, highlighting the company’s exceptional wealth creation capability despite recent short-term underperformance.

Technical Analysis: Mixed Signals but Overall Positive Momentum

The technical landscape for Sky Gold & Diamonds has undergone notable changes, prompting a reassessment of the stock’s momentum. The technical grade has shifted from sideways to mildly bearish, reflecting some caution in the short to medium term. Key indicators present a mixed picture: the weekly MACD and KST are bearish, while the monthly MACD and KST remain mildly bearish, suggesting some downward pressure.

Conversely, the Relative Strength Index (RSI) on a weekly basis is bullish, indicating short-term buying interest, while the monthly RSI shows no clear signal. Bollinger Bands present a mildly bearish stance weekly but mildly bullish monthly, reflecting some volatility with potential for upward movement. Daily moving averages are mildly bullish, supporting a positive near-term trend.

Other technical indicators such as Dow Theory show no clear weekly trend but mildly bearish monthly signals, while On-Balance Volume (OBV) is neutral weekly and mildly bullish monthly. This combination suggests that while some caution is warranted, the overall technical momentum is stabilising and could support a recovery in the stock price.

On 28 Jan 2026, the stock closed at ₹311.85, up 3.31% from the previous close of ₹301.85, with intraday highs reaching ₹319.50. The 52-week high stands at ₹403.90 and the low at ₹245.95, indicating a wide trading range but recent price strength.

Conclusion: A Compelling Buy with Balanced Risks

The upgrade of Sky Gold & Diamonds Ltd from Hold to Buy by MarketsMOJO reflects a holistic improvement across multiple dimensions. The company’s strong quality metrics, including a high ROCE and consistent profitability, combined with attractive valuation ratios and robust financial trends, provide a solid foundation for future growth. Although the technical indicators present a mixed picture with some bearish signals, the overall momentum remains cautiously optimistic.

Investors should weigh the company’s recent underperformance against the broader market and sector, but the long-term returns and institutional interest suggest significant upside potential. The stock’s current discount to peers and low PEG ratio further enhance its appeal as a value investment in the gems and jewellery sector.

Given these factors, Sky Gold & Diamonds Ltd stands out as a compelling buy for investors seeking exposure to a fundamentally strong company with improving technical momentum and attractive valuation metrics.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →