Carving a niche in evolving jewellery wardrobe…
About the stock: BlueStone Jewellery & Lifestyle Ltd. (BlueStone), founded in 2011, is an omnichannel, digital first direct to consumer (D2C) jewellery retailer in India focused on contemporary lifestyle jewellery. It is the 2nd largest player in studded segment in India. The company operates on an omnichannel model with pan-India presence through 323 stores.
Investment Rationale
Differential business model aiding strong revenue and EBIDTA growth: BlueStone differentiates itself from other branded jewellery players on back of its unique product profile, higher studded mix and omni channel distribution route enable it to deliver strong revenue growth with higher gross margins. It caters to rising consumer demand for daily wear and non-wedding occasional jewellery segments, which are expected to grow by 18-21% vs. 6-9% growth in traditional wedding jewellery segment in the coming years. With higher studded mix of ~68%, the company achieves higher gross margins of 38% compared to traditional jewellery player’s gross margins of 15-20%. Differentiated business model aided its revenues to grow at a CAGR of 56% over FY22-25 to Rs1,770cr in FY25. Strong omni channel strategy and improved conversion per store helped it to achieve EBIDTA of Rs75cr in FY25 as against EBIDTA loss of Rs26.5cr in FY22.
Omni channel strategy – a right formula for growth: Omni channel presence created a multiplier effect for BlueStone by seamlessly connecting its online presence with a steady expanding physical retail footprint. The strategy enabled the company to increase its customer base by 2.0x to 7.7 lakh customers in FY25 (& 9.0 lakh customer base in 9MFY26) from 3.9 lakh customers in FY23. The increase in customer base reflected in BlueStone’s operating model wherein ~70-80% of its overall sales is influenced online and finally converted to sale through 323 stores. Around 75% of the total stores are break-even within three months of commencing operations. Out of 323 stores around 150+ stores are nearing ~Rs.10cr annualised revenue per store per month with clear runway to scale up to ~Rs.14cr annualised revenue per store per month. Around 18 stores opened in FY19-20 are generating revenues of Rs10cr and generating pre-Ind AS EBIDTA margins of 24%, which provides visibility of strong revenue growth and margin expansion with large part of new stores expected to attain maturity in the coming years.
Revenues to grow at CAGR of 32%; EBIDTA margins to expand by 1000bps over FY25-28E: BlueStone’s focused approach towards design-led offering, higher studded mix and omnichannel execution will help it address larger customer base compared to other traditional players. With sizeable number of stores maturing ahead coupled with high repeat revenue ratio and diverse customer base, we expect BlueStone’s revenues to grow at ~32% CAGR over FY25-28E to Rs.4030.5cr. This along with higher gross margins at 38% and improved operating leverage will help in driving 1000bps expansion in the EBIDTA margins to 14%+ over FY25-28E. With improvement in the profitability and stable working capital requirement, return profile of the company is expected to consistently improve in the coming years.
Rating and Target Price:
BlueStone will benefit from changing consumption trend in the jewellery segment and achieve certain scale in the coming years. We recommend Buy on the stock assigning price target of Rs.600 (valuing at 19x FY28E EV/EBIDTA).
