P N Gadgil Jewellers Limited delivered a revenue beat of extraordinary scale in Q4FY26 — consolidated revenue of ₹3,540 crore against Motilal Oswal’s estimate of ₹2,950 crore, a 20% beat — but missed sharply on margins, with gross margin contracting 230 basis points year on year to 9.7% against an estimate of 14.7%. Motilal Oswal has reiterated its Buy rating with a target price of ₹715, even as it trimmed EPS estimates by 3% for FY27 and 1% for FY28 and acknowledged that the gold customs duty hike from 6% to 15% implemented on May 13 will moderate near-term demand.
The revenue beat
Consolidated revenue grew 123% year on year driven by same-store sales growth of 86% — one of the strongest SSSG numbers reported by any organised jeweller in recent quarters. Retail revenue grew 102% year on year, franchisee revenue increased 132%, and e-commerce sales rose 67%. The standout contributor was bar and coin sales, which surged over 200% to ₹1,400 crore — a reflection of the surge in retail gold buying ahead of the government’s import duty hike. Customer footfalls increased 10% with a conversion rate of 93%. PNGJL added 12 stores during the quarter, taking total store count to 78 across 36 cities — comprising 48 company-owned company-operated, 17 franchisee-owned company-operated, and 13 LiteStyle format stores.
The margin miss
The revenue beat came at a cost. Gross margin contracted sharply to 9.7% from the estimated 14.7% — a 500 basis point miss against estimates and a 230 basis point contraction year on year. Motilal Oswal attributed the miss to three factors: a higher gold bar and coin mix, which compressed margins by 150 basis points as bullion products carry significantly lower value-addition than jewellery; lower studded jewellery contribution, which compressed margins by 30 basis points; and elevated promotional discounts during Foundation Day and Gratitude Day campaigns, which compressed margins by 50 basis points. EBITDA margin consequently fell 210 basis points year on year to 3.8%. Management maintained FY27 PAT margin guidance of approximately 4%, while Motilal Oswal modelled PAT margins of approximately 3.5% for FY27 and FY28.
The gold duty hike impact
The government’s midnight notification on May 12 raising gold import duty to 15% from 6% is the central risk factor for FY27 jewellery demand. Management acknowledged that the duty hike could moderate bullion demand — the very product that drove the 200%+ bar and coin growth in Q4FY26 — and could accelerate old gold exchange trends as consumers increasingly use existing jewellery as a trade-in rather than buying at elevated prices with higher duty. PNGJL is responding through its ‘Suvarna Swarajya’ initiative, which targets increasing old gold contribution from approximately 40% of sales currently to 50% — a structurally margin-accretive shift since old gold exchange transactions carry lower commodity cost exposure. The company is also planning to increase its gold price hedging ratio to 75-80% from approximately 60% in FY26 to reduce margin volatility from gold price swings.
FY27 outlook and store expansion
Management guided FY27 revenue of ₹13,500 crore — approximately 3.8 times FY26’s quarterly run rate — supported by strong SSSG and continued store expansion. The company plans to add 25 stores in FY27, primarily 5 COCO and 20 FOCO format stores, with the majority of expansion outside Maharashtra. The geographic diversification beyond Maharashtra is significant — make-to-order jewellery contribution outside Maharashtra currently stands at approximately 22% versus 30-35% overall, indicating room for mix improvement in new markets over time. Franchisee margins are structurally lower at 2.5-3%, which will continue to weigh on consolidated margins as the FOCO expansion accelerates.
The QIP resolution remains valid until August 2026 but management indicated no immediate capital requirement as internal accruals are sufficient for current growth plans.
Motilal Oswal models revenue, EBITDA, and adjusted PAT CAGR of 17%, 13%, and 10% respectively over FY26-28, with the EBITDA-to-PAT CAGR gap reflecting the margin compression from franchisee mix and gold duty headwinds. The ₹715 target price implies approximately 24.9% upside from the stock’s post-selloff levels near ₹573.90 on May 15.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.