Motilal Oswal Remains Neutral on Senco Gold, Targets Rs 375
Senco Gold Delivers Strong Revenue Growth, Beats Estimates
Senco Gold, a leading gold jewelry retailer, has reported a consolidated revenue growth of 45% year-over-year (YoY) to INR20 billion, outpacing its peers who have seen growth of over 50%. The company's same-store sales growth (SSSG) stood at 34% in FY26, driven by strong demand for wedding jewelry and gifting trends, as well as a higher old-gold exchange mix, which accounted for 50% of revenue.
Despite elevated gold prices, Senco Gold's gold volumes declined 6% in FY26. However, the company's management has highlighted that demand momentum sustained in the first quarter, and expects to deliver approximately 20% revenue growth in FY27. The company has been expanding its retail presence, opening five new stores during the quarter, bringing its total store count to 201. This includes 102 company-owned company-operated (COCO) stores, 85 franchise-owned franchise-operated (FOCO) stores, 12 Sennes stores, and two stores in Dubai. For FY27, Senco Gold plans to open 18-20 new stores.
The company's gross margin (GM) expanded sharply by 560 basis points (bp) YoY to 22.4%, surpassing estimates of 18.5% and 19.9% in the third quarter of FY26. Inventory gains were approximately 4.5% in the fourth quarter and 3.5% in FY26, leading to a significant beat in the company's estimates. Notably, Senco Gold has reduced its inventory levels to 40-50% in FY26, down from 95% in FY25.
The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded by 450bp YoY to 13.7%, exceeding estimates of 9.3% and 13.4% in the third quarter of FY26. Management has guided for EBITDA margin to be maintained at 7.5-7.8% going forward. Based on this guidance, we model EBITDA margin to be 7.5% in FY27 and FY28, which is in line with the average EBITDA margin of FY23-25.
| FY | Revenue (INR billion) | SSSG (%) | GM (%) | EBITDA Margin (%) |
|---|---|---|---|---|
| FY26 | 20 | 34 | 22.4 | 13.7 |
| FY25 | 13.8 | 24 | 19.9 | 13.4 (3Q) |
Given the inconsistencies in Senco Gold's operating performance and low hedging ratios, we remain cautious on the company's operating margin performance going forward. As a result, we reiterate our Neutral rating with a target price (TP) of INR375, based on a multiple of 15 times the estimated earnings per share for March 28.
Investor Takeaway
Motilal Oswal maintains a neutral stance on Senco Gold with a target price of Rs 375.
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