Shares of Thangamayil Jewellery Ltd (TJL) experienced a notable rise of nearly 7% on September 2, following HDFC Securities' initiation of coverage on the stock with a buy rating. The brokerage has set a target price of Rs 2,500 per share, up from the current market price, marking a significant boost for those involved in share market investment.
A promising share market investment opportunity
At 9:20 AM, Thangamayil Jewellery's stock was trading at Rs 2,175 on the Bombay Stock Exchange (BSE), reflecting a 7% increase from its previous close. This uptick comes amid a 0.25% gain in India's benchmark Sensex, which was trading at 82,575 points. For investors looking to enhance their portfolios, Thangamayil Jewellery presents an intriguing share market investment opportunity.
Growth projections fueling the share market investment buzz
HDFC Securities projects impressive growth for Thangamayil Jewellery, forecasting a revenue compound annual growth rate (CAGR) of 26%, an EBITDA CAGR of 33%, and a PAT CAGR of 41% over the period from FY24 to FY27. Several factors, including the advantages of formalisation, rapid store expansion, value-for-money products, and access to capital at competitive rates, drive this growth trajectory.
The brokerage likens Thangamayil Jewellery to "D-Mart of Tamil Nadu's jewellery retail sector," noting its focus on "high inventory turns and reasonable margins," in contrast to other listed jewellery players who emphasise "high operating margins and low inventory turns." This approach positions Thangamayil Jewellery as a strong candidate for those seeking promising share market investments.
Anticipated re-rating and store expansion
HDFC Securities anticipates a significant re-rating for Thangamayil Jewellery, with its return on equity (ROE) expected to rise from 18% in FY23 to 32% by FY27. This projected performance significantly outpaces Titan, the market leader in the organised jewellery sector. For share market investors, this anticipated improvement in ROE underscores Thangamayil Jewellery's potential as a robust share market investment.
Additionally, the brokerage foresees Thangamayil Jewellery opening 30 large-format stores between FY25 and FY27, nearly doubling its current store area. This expansion, combined with a forecasted 26% sales CAGR over FY24-27, is set to drive substantial growth for the company.
Industry trends benefiting share market investment
The jewellery industry's formalisation has accelerated since the introduction of hallmarking norms in June 2021. Moreover, the Union Budget's reduction of import duty from 15% to 6% in July 2024 is expected to benefit organised jewellers like Thangamayil. As customers shift from small, traditional jewellers to value-focused retailers, Thangamayil is well-positioned to capture a larger share of the Tamil Nadu market.
For share market investors, Thangamayil Jewellery offers a compelling case. Its ability to deliver a superior customer experience, broader product range, and lower making charges all contribute to its appeal as a top share market investment.
Conclusion
Thangamayil Jewellery's recent 7% share price surge, coupled with HDFC Securities' buy rating and target price upgrade, highlights the company's strong potential as a share market investment. With robust growth projections, planned store expansions, and favourable industry trends, Thangamayil Jewellery stands out as a promising option for investors looking to capitalise on the jewellery sector's upward trajectory.
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