Nuvama Institutional Equities initiated coverage on PN Gadgil Jewellers with a ‘Buy’ rating. The brokerage house has set a target price at Rs 860, implying an upside of 31% from the current levels. The recommendation is based on the back of a strong growth trajectory, aggressive expansion, and expected improvement in profitability.
Here are 3 factors why Nuvama initiated coverage on P N Gadgil with a Buy rating:
Nuvama on PN Gadgil: Strong market position in Maharashtra
PN Gadgil is recognised as the second-largest organised retail jewellery player in Maharashtra by the number of stores. The company is focused on cementing its position and targeting leadership in Maharashtra, which is the largest market for BIS-registered outlets in India. The company is planning to expand out of Maharashtra into othe states as well, penetrating those markets’ deep pockets. However, this expansion may lead to pressure on average revenue per store.
Nuvama on PN Gadgil: Aggressive geographical expansion
The gems and jewellery company plans to open 25 stores over the next two to three years, implying a store addition CAGR of 34% over FY25–28. This expansion includes foraying outside of its home state, with recent store openings in Indore, Kanpur, and Lucknow. This store addition led the brokerage’s revenue estimate of 18% CAGR over FY25–28.
Nuvama on PN Gadgil: Improving product mix to drive margin expansion
PN Gadgil is focused on improving its portfolio by increasing the share of high-margin studded jewellery. The gross margin for studded jewellery (35–40%) is significantly higher than that of traditional gold jewellery (15–20%). The brokerage firm expects that the uptake in the high-margin studded mix, partly through new concepts like “Litestyle by PNG,” will lift its contribution to double digits by FY27. Plus, this will help margins to improve over the next two to three years. This favourable product mix, combined with operational leverage, is estimated to drive net profit growth at 26% CAGR over FY25–28.