Thangamayil Jewellery Ltd Upgraded to Strong Buy on Robust Fundamentals and Technical Momentum

Quality Assessment: Outstanding Financial and Operational Metrics

Thangamayil Jewellery’s quality rating has been bolstered by its exceptional financial performance in Q3 FY25-26. The company reported net sales of ₹2,405.83 crores, marking the highest quarterly figure to date. Operating profit (PBDIT) surged to ₹172.11 crores, while profit before tax excluding other income (PBT less OI) reached ₹145.52 crores, both record highs. This consistent upward trajectory is further underscored by the company’s five consecutive quarters of positive results.

Management efficiency remains a key strength, with a return on capital employed (ROCE) of 16.15%, indicating effective utilisation of capital to generate profits. This figure surpasses many peers in the Gems, Jewellery and Watches sector, reinforcing the company’s operational robustness. Institutional investors have also increased their stake to 21.32%, up 1.46% from the previous quarter, signalling strong confidence from sophisticated market participants.

Valuation: Expensive Yet Justified by Growth and Market Position

While the company’s valuation remains on the higher side, with an enterprise value to capital employed ratio of 6, it is trading at a discount relative to its peers’ historical averages. The price-to-earnings growth (PEG) ratio stands at a modest 0.6, reflecting undervaluation when adjusted for the company’s rapid profit growth of 109.6% over the past year. This suggests that despite the premium valuation metrics, the stock offers attractive growth-adjusted value.

Thangamayil Jewellery’s market capitalisation grade remains moderate at 3, indicating room for further expansion as the company scales. The current share price of ₹3,743.25 is comfortably below its 52-week high of ₹4,138.15, providing a reasonable entry point for investors seeking exposure to the diamond and gold jewellery segment.

Financial Trend: Strong Growth Momentum and Profitability

The company’s financial trend has been markedly positive, with net sales growing at an annualised rate of 37.38% and operating profit expanding by 23.92%. Net profit growth has been even more impressive at 79.08%, reflecting operational leverage and cost efficiencies. These figures highlight Thangamayil Jewellery’s ability to sustain high growth while maintaining profitability.

Returns to shareholders have been exceptional, with the stock delivering 140.08% returns over the past year, vastly outperforming the Sensex’s 10.44% gain in the same period. Over longer horizons, the company’s returns have been even more striking: 664.27% over three years and an extraordinary 4,053.77% over ten years, underscoring its status as a long-term wealth creator in the gems and jewellery sector.

Technicals: Bullish Signals Drive Upgrade

The upgrade to Strong Buy was significantly influenced by improvements in technical indicators. The technical trend has shifted from mildly bullish to bullish, supported by multiple positive signals across timeframes. Daily moving averages are bullish, while Bollinger Bands indicate upward momentum on both weekly and monthly charts.

Although the weekly MACD and KST indicators remain mildly bearish, the monthly MACD and KST have turned bullish, suggesting strengthening momentum over the medium term. Dow Theory assessments also reflect a mildly bullish weekly trend and a bullish monthly trend, reinforcing the positive outlook. The stock’s recent price action, with a day change of +4.13%, and a trading range between ₹3,564.75 and ₹3,820.00, further confirms strong buying interest.

Comparative Performance and Market Context

Thangamayil Jewellery’s stock has consistently outperformed broader market indices and sector benchmarks. Over the last one month, the stock gained 4.69% compared to the Sensex’s 0.84%. Year-to-date returns stand at 16.35%, while the Sensex has declined by 3.51%. This outperformance is a testament to the company’s resilience and growth potential amid a challenging macroeconomic environment.

Its long-term track record is equally impressive, with cumulative returns over five years at 1,132.51%, dwarfing the Sensex’s 61.92% gain. This sustained outperformance highlights the company’s ability to generate shareholder value through strategic execution and market leadership in the diamond and gold jewellery industry.

Risks and Considerations

Despite the positive outlook, investors should be mindful of certain risks. The company’s valuation remains relatively expensive, with a ROCE of 14.6% and an enterprise value to capital employed ratio of 6. While these metrics are justified by growth, they imply limited margin for valuation expansion. Additionally, the stock’s technical indicators, though improving, still show some mixed signals on weekly momentum, warranting cautious monitoring.

Market volatility in the gems and jewellery sector, fluctuations in gold and diamond prices, and potential regulatory changes could also impact performance. However, the company’s strong fundamentals and institutional backing provide a buffer against these risks.

Conclusion: A Compelling Investment Proposition

The upgrade of Thangamayil Jewellery Ltd to a Strong Buy rating reflects a comprehensive improvement across quality, valuation, financial trends, and technicals. The company’s outstanding quarterly results, robust growth metrics, and bullish technical signals combine to present a compelling investment case. With a strong management team, growing institutional interest, and a proven track record of delivering superior returns, Thangamayil Jewellery is well-positioned to capitalise on the expanding demand in the gems and jewellery sector.

Investors seeking exposure to a high-quality, growth-oriented stock in this space should consider the upgraded rating as a signal of confidence in the company’s future trajectory.

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