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 per cent 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).
