From record highs to sharp slide: What the pullback in gold means for jewellery stocks?

The Gold rate today has been the talk of the town. The sudden 5% dive in gold prices with no obvious catalyst has been the main focus for investors. As the yellow metal tumbled from record highs amidst the festive buying during Diwali and Bhai Dooj, what’s going to be the impact on gold jewellery stocks? 

The disconnect between the gold rate and the performance of the gold jewellery stocks has been evident through the last 1 year. While the precious metal has had a blockbuster run this year, climbing more than 50%, this hasn’t translated into similar gains for gems and jewellery sector stocks. In fact, over the past 1 year, many like Senco Gold are down close to 50% while Kalyan Jewellers and PC Jewellers have seen nearly 30% loss in the last 1 year. 

Here is a quick look at some of the key gold jewellery stocks that have caught the attention of key brokerage houses and their predictions in terms of the price movement ahead. 

PN Gadgil: Upside potential of upto 31%

Key brokerage houses like Motilal Oswal and Nujvama have a Buy rating on the stock. Motilal Oswal anticipates almost 24% rally in the stock going forward and have a 12-month price target of Rs 825 per share. Nuvama has a price target of Rs 860 per share. This implies 31% upside for the PN Gadgil share price. 

PN Gadgil Jewellers is Maharashtra’s second-largest organised jeweller by network. The strong store productivity underpinned by regional expertise is one of the key factors driving the positive recommendation.  The company’s aggressive expansion in terms of  geographical footprint across Maharashtra and into northern states also supports the Buy call. That apart, sprucing up the portfolio with a contemporary streak of high-margin studded jewellery with improving revenue share is another key factor driving growth. 

Sky Gold & Diamond: Upside potential of upto 24%

This is another interesting counter. The share price of Sky Gold and Diamond is among the few stocks in the gens and jewellery sector stocks that delivered positive returns in the last 1 year. The stock has gained 8% in 1 year. Leading brokerage house Nuvama recently initiated coverage on the stock with a Buy rating. They have a target price of Rs 450 per share. This implies an upside of 24% from current levels. 

According to Nuvama, “Sky Gold shines out as a leading B2B pure-play designer and manufacturer of gold jewellery, and its clientele is studded with giants of Indian jewellery retailing.” They explained that the recent capacity expansion, along with acquisitions over the past two years in newer categories, “makes the company a perfect proxy for rising formalisation of a largely unorganised sector. Future efficiency and growth will be driven by untapped levers, including the advance gold model and scaling up the less working capital-intensive export business.”

Senco Gold: Upside potential of upto 13%

The share price of Senco Gold has been in focus for seeing the maximum cut in the last 1 year among the list of gems and jewellery stocks. Speaking on the current trends, Suvankar Sen – MD & CEO, Senco Gold & Diamonds pointed out that there On the demand side, there has been an interesting shift, “studded and diamond jewellery is steadily gaining ground as buyers balance sentiment with value. There is also strong traction for diamond and platinum jewellery in the everyday wear range. At the same time, our old gold exchange scheme and savings-led initiatives are bringing younger family members into the conversation, teenagers and first-time buyers are encouraging parents to think of gold as both love and a long-term asset and has gone up by 25-30% this year. We’ve even noticed more men investing in themselves.”

However, he pointed out that the emphasis is more on design, and lower caratages of gold, like 9K and 14K, are attracting customers. 

Motilal Oswal has a Neutral rating on Senco Gold. They have a price target of Rs 385 per share and this implies there is still room for some upside, nearly 13% expected over the next 12 months.  According to the leading domestic brokerage house, “inventory has been strategically built with a mix of festive and bridal collections, lightweight jewellery, and the introduction of 9K gold jewellery to cater to evolving consumer preferences.” Their overall outlook remains optimistic about Senco Gold, “supported by: – favourable macroeconomic environment, – higher disposable incomes post-GST cut, and – robust festive and wedding-related demand.”