Buy P N Gadgil Jewellers; target of Rs 700: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • PN Gadgil Jewellers (PNG) has reported a 22% YoY revenue growth in 2QFY27, driven by a 31% YoY growth in retail revenue and a 35% YoY growth in franchisee revenue. The company's retail studded mix improved to 11.9% from 9.0% in 2QFY26.
  • PNG plans to add 23 stores in FY27, taking its total store count to 103, with a focus on expanding its presence in new geographies, particularly in Uttar Pradesh. The company aims to achieve a 30-35% revenue contribution from new markets by FY30.
  • The company has reported a strong EBITDA margin expansion of 300bp YoY to 7.6% in 2QFY27, driven by a 21% YoY decline in other expenses. Management expects advertising and promotional spends to moderate in 2HFY27.
  • PNG has a strong balance sheet, with a net debt reduction of INR1.7b in 2QFY27, and plans to reduce its borrowings by 20-25% by FY29-30.

Thesis Validation Checklist

  • The company's ability to sustain its demand momentum and cost control measures will be key to validating its growth thesis. Investors should watch for the company's progress in expanding its retail presence, improving its profitability, and achieving its revenue guidance of INR130b+ for FY27.
  • The company's ability to scale up its new markets, particularly in Uttar Pradesh, and achieve its target of 30-35% revenue contribution from new markets by FY30, will be crucial to its long-term growth.
  • The sustainability of the company's cost efficiencies and its ability to maintain its EBITDA margin expansion will be important to monitor.
  • The company's balance sheet health and its ability to reduce its borrowings will also be key to its long-term sustainability.