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Senco Gold shares fall another 15% to extend two-day drop to 32%; Know what investors should do now
Senco Gold Shares Fall Today
Senco Gold Share Price: Shares of Senco Gold plunged by as much as 14.8% on Monday, dropping to Rs 304.5 on the BSE. This extended the stock’s losses to nearly 32% over two sessions, following the company’s report of a sharp 69.3% year-on-year (YoY) decline in its third-quarter profit after tax (PAT).
The jewellery retailer’s PAT fell to Rs 33.48 crore in the October-December quarter, down from Rs 109.32 crore in Q3FY24. Adjusted PAT also dropped by 50.9% YoY to Rs 53.74 crore. Despite robust revenue growth of 27.3%, reaching Rs 2,102.55 crore in Q3, profitability was impacted by higher costs, margin pressures, and losses related to customs duties, according to the company.
As of 11:21 AM, Senco Gold shares were trading at Rs 313.30 on the NSE. The sharp decline was further exacerbated by a significant spike in trading volumes, with 49 lakh shares changing hands so far, far exceeding the one-month daily average of eight lakh shares.
Senco Gold’s EBITDA margin took a hit in Q3, falling to 3.8%, a significant drop from the 11% reported in the same period last year, largely due to the costs associated with launching new subsidiaries. The management attributed this margin contraction to the impact of customs duties over the past two quarters and the overall volatility in gold prices. The company had previously anticipated EBITDA margins in the 7-8% range.
This weak operational performance also impacted the bottom line, with net profit slumping to Rs 33.5 crore, down from Rs 101.3 crore in Q3FY24. However, revenue remained strong, reaching a record high of Rs 2,100 crore, a 27% increase compared to last year.
Despite the volatility in gold prices, which surged 22% YoY and 20% since April 2024, consumer demand remained solid. The reduction in customs duties in Q2 helped boost sales in Q3, particularly during Dhanteras and Diwali, according to the management.
Looking ahead, Sanjay Banka, CFO of Senco Gold, expressed confidence that the company could achieve a 7-8% EBITDA margin on an annualized basis, excluding one-off events. He also expects this margin to improve in Q4 and beyond, supported by the company’s strong brand positioning and operational leverage. “We aim to further boost sales through innovative offerings and premium pricing,” Banka said.
What Should Investors Do Now?
Brokerage firm Motilal Oswal downgraded Senco Gold’s rating from ‘Buy’ to ‘Neutral,’ citing margin volatility and weak earnings visibility. It set a target price of Rs 400, suggesting a 31% potential upside from current levels. While revenue growth remains strong, the sharp contraction in gross margins and hedging-related costs have raised concerns about the company’s future margin trajectory. Motilal Oswal lowered its earnings estimates for FY25-FY27 by 25%-30%, citing uncertainties regarding operating margins and slower same-store sales growth compared to peers.
Brokerage Emkay Global also expressed concerns about margin volatility but maintained a more balanced outlook. It noted that Senco’s reported Q3 EBITDA missed expectations by about 500 basis points, mainly due to a hedging loss in the current quarter, compared to a hedging gain in the base quarter. While the sharp fluctuation in gross margins is concerning, Emkay noted that Senco attributes this to the volatile gold-price environment.
Emkay reduced its PAT estimates by 13%-16% and cut its target price by 23% to Rs 600 due to weaker profitability and return on capital employed (ROCE). However, the brokerage believes that the nearly 50% correction in Senco’s stock from its 52-week high seems excessive. “An assuring explanation for the margin volatility should be the key catalyst for a re-rating,” Emkay added.
Despite the weak quarterly performance, Senco Gold remains optimistic. “We remain confident in achieving a 7%-8% EBITDA margin annually, excluding any one-off events,” CFO Sanjay Banka said. He attributed the lower margins in Q3 to customs duties and expects improvement in Q4 and beyond.
Shares of Senco Gold have plunged from Rs 446.95 to Rs 304.5, marking a 32% drop in just two sessions. Over the past year, the stock has lost 15.34%, and in the last six months, it has dropped 40.49%. However, over a three-year period, the shares are still up by 109.31%.
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