Shares of Kalyan Jewellers India fell on Wednesday after its Q1 FY27 results, despite Citigroup raising its target price on the jewellery retailer. However, the brokerage cautioned that weaker-than-expected margins could weigh on the stock in the near term.

Kalyan Jewellers shares were trading 1.4 percent lower at Rs 583 in early trade after ending Tuesday's session 2.7 percent lower ahead of the company's quarterly results. Despite the recent pullback, the stock has rallied about 66.7 percent since July 7, adding nearly Rs 24,500 crore to its market capitalisation in less than a month. The stock is up 22.1 percent so far in 2026, outperforming the Nifty 50, which has declined 5.9 percent over the same period.

Citi retained its Buy rating on Kalyan Jewellers and raised its target price to Rs 800 per share from Rs 750, implying an upside of more than 35 percent from Tuesday's closing price. The brokerage said revenue, excluding bullion sales, grew 38 percent year-on-year during the June quarter, about 1 percent below its estimate. However, profitability fell short of expectations.

After adjusting for a Rs 41 crore customs duty-related inventory benefit, Citi said EBITDA and net profit rose 16 percent and 20 percent year-on-year, respectively. Even so, adjusted EBITDA and adjusted profit after tax were 17 percent and 20 percent below the brokerage's estimates.

According to Citi, the earnings miss was driven by higher old-gold exchange transactions, increased promotional spending and a higher contribution from franchise stores, all of which weighed on margins during the quarter.

The brokerage said that the Rs 41 crore inventory gain arising from the customs duty change was not retained as profit but was instead reinvested into exchange offers to drive customer demand.

Despite the margin pressure, Citi remained constructive on the company's long-term outlook. It highlighted improving balance sheet metrics and pointed to the monetisation of non-core assets as an additional positive. Kalyan Jewellers has signed an agreement to sell non-core real estate worth Rs 100 crore and expects the release of an additional Rs 200 crore of collateral during FY27, moves that the brokerage believes will further strengthen the balance sheet.

At the same time, Citi cautioned that the first-quarter margin miss could keep the stock under pressure in the near term, even though the brokerage continues to see attractive long-term upside.

Kalyan Jewellers reported a 32 percent year-on-year increase in consolidated net profit to Rs 348.7 crore for the June quarter, while revenue from operations rose 45.7 percent to Rs 10,588.9 crore. EBITDA increased 24.5 percent to Rs 632.5 crore, although the EBITDA margin narrowed to 6 percent from 7 percent a year earlier, reflecting higher costs and a less favourable operating mix.