Target: ₹1,400
CMP: ₹1,131.75
Senco Gold has reported a big beat to our Q1 EBITDA/PAT estimates led by better gross margin (up by about 500bps YoY). The sudden spike in gold price and operating challenges led to a modest retail revenue growth of 11 per cent in Q1, in line with muted trends seen in Titan. However, a big 900bps duty cut on gold and return of operating normalcy has driven a strong recovery with FY25TD retail growth climbing to about 20 per cent.
Senco Gold has retained its FY25 growth outlook of 18-20 per cent. The EBITDA margin beat of about 250 bps was led by better franchisee terms, lower discounting/better gold premium, and a low-margin base as hedging remained at around 95 per cent in Q1. While the duty cut significantly improves medium-term prospects, Senco Gold expects a short-term hedging loss of ₹50 crore, which shall be distributed over the next 2-3 quarters.
Margin beat drives a about 12 percent upward revision to our earnings estimates. Senco Gold is trading at considerable discount to peers despite similar or better operating performance.
We increase our TP multiple by 5 per cent and revise TP up to ₹1,400/share (based on 32x Sep-25E EPS).
