Senco Gold vs Kalyan Jewellers: Which jewellery stock should you pick for long term?

Jewellery stocks have been dazzling on Dalal Street, delivering impressive gains and adding a shine to investors' portfolios. Boosted by surging demand and favourable market sentiment, these stocks have exceeded expectations, with leading companies in the sector witnessing substantial growth. The rise in gold prices and festive season demand has fueled a buying frenzy, further enhancing their appeal.

As this rally continues, investors are now left pondering an important question: which stock offers better long-term potential—Senco Gold or Kalyan Jewellers?

Stock Price Trend

Kalyan Jewellers has outperformed Senco Gold in 2024, with Kalyan rising 100 per cent year-to-date, while Senco gained nearly 84 per cent during the same period. Both companies have delivered positive returns in six of the nine months this year.

Senco experienced a 17 per cent rise in September, following a 12.2 per cent jump in August. Before that, the stock fell 15.4 per cent in July after a strong 29.7 per cent gain in June. It saw a 5.2 per cent decline in May after a 21 per cent surge in April, with earlier fluctuations including a 7 per cent fall in March, a 5.4 per cent rise in February, and a 13 per cent gain in January.

On the other hand, Kalyan Jewellers surged 15.6 per cent in September, extending its rally for the fourth consecutive month. It saw a 6.2 per cent gain in August, a 15.6 per cent rise in July, and a 29 per cent rally in June. Before that, the stock dropped 6.2 per cent in May and 3.2 per cent in April. Kalyan also posted gains of 7.8 per cent in February and 13.3 per cent in March, though it shed just over 1 per cent in January.

Over the past year, both jewellery stocks have given multibagger returns, with Kalyan leading, surging over 223 per cent against an over 173 per cent jump in Senco.

Boosted by strong market sentiment and investor confidence, Senco Gold reached an all-time high of ₹1,343.65 on September 19. Currently trading at ₹1,279.90, the stock is just 4.7 per cent below its peak. Additionally, it has surged 173.5 per cent from its 52-week low of ₹467.95, recorded in September 2023.

Similarly, Kalyan Jewellers hit a record high of ₹749 on September 13, 2024. The stock trades at ₹708, 5.5 per cent from its peak. Kalyan has experienced an impressive rally of over 249 per cent from its 52-week low of ₹202.60, also hit in September last year.

Senco vs Kalyan: A Comparative Look at Q1 FY25 Earnings

Senco Gold Ltd reported a net profit of ₹51.27 crore for the first quarter of FY2024 (April-June), reflecting an 85.4 per cent rise, driven by increased revenue. The Kolkata-based gold and diamond jewellery retailer saw its consolidated revenue grow by 7.5 per cent year-on-year to ₹1,403.89 crore for the quarter ending June 30. The company’s EBITDA surged by 61.8 per cent to ₹108.74 crore during the period, with retail sales increasing by 9.6 per cent year-on-year and same-store sales growth at 4 per cent.

Meanwhile, Kalyan Jewellers India Ltd reported a 23.6 per cent year-on-year rise in net profit, reaching ₹177.8 crore for the same quarter. The company's revenue from operations increased by 26.5 per cent to ₹5,535.5 crore, compared to ₹4,375.7 crore in the corresponding period of the previous year. Kalyan's EBITDA rose by 16.5 per cent to ₹376.1 crore, though its EBITDA margin slightly decreased to 6.8 per cent from 7.4 per cent a year earlier.

Which stock should you pick between Senco Gold and Kalyan Jewellers for the long term?

As jewellery stocks continue to shine in the market, Senco Gold and Kalyan Jewellers have emerged as strong contenders for investors seeking long-term gains. With impressive returns in recent months, these stocks have drawn significant attention. While Kalyan Jewellers has demonstrated superior performance in terms of quality and sentiment, Senco Gold holds an edge on the value front. The question remains: which stock is the better pick for long-term growth?

Sujit Modi, CIO, Share.Market prefers Senco Gold over Kalyan Jewellers

Jewellery stocks, including Senco Gold and Kalyan Jewellers, have been in an uptrend for the past 3 months. These stocks have generated massive returns over this short period.

Focusing on the various factors powered by Share.Market research shows that apart from obvious high scores on momentum, Kalyan Jewelers scores higher on Quality, Low Volatility, and Sentiment factors.

However, regarding the value factor, Senco Gold seems marginally better.

This indicates that Kalyan Jewellers, being better in quality, is slightly overvalued compared to Senco Gold. Investors need to keep this in mind when deciding which stocks to add to their portfolio.

Aamir Makda, Commodity & Currency Analyst, Choice Equity Broking has also chosen Senco over Kalyan

We believe that Senco Gold is a better long-term investment than Kalyan Jewellers. The key reason for this is that Senco Gold's current P/E ratio of 45 is significantly lower than Kalyan Jewellers' P/E ratio of over 110. This suggests that Senco Gold is currently undervalued relative to its earnings.

While both companies have similar dividend yields and ROCE percentages, Senco Gold has delivered stronger profit growth over the past five years, with a CAGR of 20.4%. Additionally, Senco Gold has a higher EPS than Kalyan Jewellers at present.

Based on these factors, I believe that Senco Gold is a more attractive long-term investment than Kalyan Jewellers.

MOSL is bullish on both the jewellery stocks

Motilal Oswal projects robust growth for Kalyan Jewellers, driven by an asset-light franchise expansion strategy expected to generate sufficient cash flow to repay its ₹600 crore Indian debt within two years. With a strong FY24 ratio of 28 per cent, the company is praised for aligning with shifting consumer preferences, particularly among younger audiences. Consequently, Motilal Oswal has assigned a 'Buy' rating to the stock.

In contrast, Senco Gold is a key player in the organized retail jewellery market, boasting a strong national presence, especially in the eastern region, where it operates 159 stores. Holding about 4 per cent market share in West Bengal, analysts see Senco Gold as well-positioned for future growth. Motilal Oswal anticipates a compound annual growth rate (CAGR) of 19 per cent for revenue, 20 per cent for EBITDA, and 26 per cent for profit after tax (PAT) from FY24 to FY26, also issuing a 'Buy' rating for the company.

ICICI Direct also sees potential in both stocks

ICICI Direct highlighted that Kalyan Jewellers meets most of the CANSLIM investment criteria. The stock has shown strong momentum, with its price trading above short-, medium-, and long-term moving averages. Additionally, Kalyan has demonstrated improving financial health, which is marked by rising net cash flow and increased cash from operating activities. This positive trend reinforces its strong position in the market.

ICICI Direct noted that Senco Gold has strong momentum, with its stock price consistently trading above short-, medium-, and long-term moving averages. The company has exhibited high trailing twelve months (TTM) earnings per share (EPS) growth and an increase in net profit alongside rising profit margins on a quarter-on-quarter basis. However, the brokerage highlighted some weaknesses, including inefficient use of capital, as reflected in a declining return on capital employed (RoCE) over the past two years. Additionally, return on equity (RoE) and return on assets (RoA) have decreased, indicating less efficient use of shareholder funds and assets to generate profits.

Both Senco Gold and Kalyan Jewellers offer compelling opportunities with distinct strengths. Kalyan Jewellers shows promise with its asset-light expansion strategy and focus on youth-oriented trends. At the same time, Senco Gold is well-positioned for growth in the organized retail jewellery market, particularly in the eastern region. Investors should weigh Kalyan’s quality advantage against Senco's better valuation and potential for strong earnings growth before making their choice.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.