Sky Gold & Diamonds Ltd Upgraded to Strong Buy on Robust Fundamentals and Technicals

Technical Indicators Signal Renewed Momentum

The primary catalyst for the upgrade lies in the technical trend, which has shifted from mildly bullish to bullish. Key weekly indicators such as the Moving Average Convergence Divergence (MACD) and Bollinger Bands have turned decisively bullish, signalling upward momentum in the stock price. The weekly On-Balance Volume (OBV) also supports this positive trend, indicating strong buying interest.

Daily moving averages confirm this bullish stance, with the stock currently trading at ₹378.40, up 1.91% from the previous close of ₹371.30. The stock’s 52-week high stands at ₹403.90, while the low is ₹245.95, highlighting a substantial recovery and upward trajectory over the past year.

Although some monthly indicators such as the MACD and KST (Know Sure Thing) remain mildly bearish, the weekly signals carry more weight for short- to medium-term trading perspectives. The absence of clear RSI signals on both weekly and monthly charts suggests the stock is not yet overbought, leaving room for further gains.

Valuation Adjusted to Reflect Market Realities

Alongside technical improvements, the valuation grade has been revised from attractive to fair. The company’s price-to-earnings (PE) ratio currently stands at 25.56, which is reasonable compared to peers such as Thangamayil Jewellery (PE 46.63) and Rajesh Exports (PE 29.36). The enterprise value to EBITDA ratio of 18.07 also supports a fair valuation stance.

Return on capital employed (ROCE) at 17.21% and return on equity (ROE) at 17.87% underscore efficient capital utilisation and profitability. The PEG ratio of 0.25 further indicates that earnings growth is favourable relative to the stock price, suggesting undervaluation on a growth-adjusted basis.

While the valuation is no longer classified as attractive, it remains competitive within the diamond and gold jewellery industry, especially when compared to companies like Bluestone Jewellery, which is currently loss-making and carries a risky valuation profile.

Financial Trends Highlight Sustained Growth and Profitability

Sky Gold & Diamonds Ltd has demonstrated very positive financial performance in Q3 FY25-26, with net sales reaching a record ₹1,767.68 crores and operating profit surging by 20.33% quarter-on-quarter. The company has reported positive results for 11 consecutive quarters, reflecting consistent operational strength.

Operating profit to interest coverage ratio stands at a robust 5.78 times, indicating strong ability to service debt. The PBDIT for the quarter was ₹122.38 crores, the highest recorded to date. Annualised net sales growth rate of 70.31% and operating profit growth of 119.35% further reinforce the company’s upward trajectory.

Over the past year, the stock has delivered an 8.04% return, while profits have increased by 112.1%, underscoring the company’s ability to convert revenue growth into bottom-line gains. This is reflected in the PEG ratio of 0.3, which remains attractive for growth investors.

Quality Metrics and Institutional Confidence

The company’s quality grade remains high, supported by a Mojo Score of 81.0 and an upgraded Mojo Grade of Strong Buy from the previous Buy rating. This reflects strong management efficiency and operational excellence.

Institutional investors have increased their stake by 2.87% over the previous quarter, now holding 12.44% collectively. This growing institutional participation signals confidence in the company’s fundamentals and future prospects, as these investors typically conduct rigorous due diligence before increasing exposure.

Sky Gold & Diamonds Ltd’s market capitalisation grade remains at 3, indicating a mid-sized company with significant room for growth within the Gems, Jewellery and Watches sector.

Comparative Performance and Market Context

When benchmarked against the Sensex, Sky Gold & Diamonds Ltd has outperformed significantly over multiple time horizons. The stock returned 13.02% in the past week versus a Sensex decline of 0.59%, and 16.09% over the past month compared to a marginal 0.20% gain in the Sensex.

Year-to-date, the stock has gained 13.46%, while the Sensex has fallen 1.74%. Over three and five years, the stock’s returns have been extraordinary at 1,128.97% and 4,069.7% respectively, dwarfing the Sensex’s 37.26% and 63.15% returns over the same periods. This long-term outperformance highlights the company’s strong growth trajectory and investor appeal.

Despite recent gains, the stock trades below its 52-week high of ₹403.90, suggesting potential upside remains as market sentiment improves and fundamentals continue to strengthen.

Outlook and Investment Considerations

The upgrade to Strong Buy reflects a confluence of factors: bullish technical signals, fair yet improving valuation, robust financial performance, and high-quality management execution. Investors should note the company’s consistent quarterly growth, strong capital efficiency, and increasing institutional interest as positive indicators for sustained momentum.

However, the valuation shift from attractive to fair suggests that some of the recent gains are already priced in, and investors should monitor market conditions and sector dynamics closely. The Gems, Jewellery and Watches sector remains sensitive to global economic factors and consumer demand trends, which could impact near-term performance.

Overall, Sky Gold & Diamonds Ltd presents a compelling investment case for those seeking exposure to a fundamentally strong and technically sound company within the luxury goods space.

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