Senco Gold hits new high; zooms 86% in 8 weeks on strong earnings hope

Gold prices moved southwards in Q2 based on muted gold demand globally and in lndia, which also helped in volume growth, Senco Gold said.

Shares of Senco Gold hit a new high of Rs 746.55, surging 10 per cent on the BSE in Friday’s intra-day trade on the back of heavy volumes amid expectations of strong earnings. The stock of jewellery retailer surpassed its previous high of Rs 721.65 touched on October 20.

In past eight weeks, the stock has zoomed 86 per cent from a level of Rs 401 on September 9. The market price of Senco Gold has more-than-doubled or skyrocketed 136 per cent from its issue price of Rs 317 per share. The company had raised Rs 405-crore through initial public offering (IPO) and made it stock market debut on July 14, 2023.

The average trading volumes at the counter jumped over two-fold with a combined 1.5 million equity shares of Senco Gold changing hands on the NSE and BSE.

The board of directors of the company are scheduled to meet on November 9, to consider and approve the unaudited financial results of the company for Q2FY24.

In Q2 business update, Senco Gold had said the growth during the quarter has been very satisfactory despite no festive season and in line with past trends. The company achieved 26 per cent year-on-year (YoY) revenue growth in Q2, while it had achieved 29.5 per cent YoY growth in Q1FY24.

The tailwind for the growth came from higher footfall based on enhanced customer engagement, higher wedding sales, relaunch of Raiwada wedding collection, new collection launches (Mariposa, Spectra and Tria), sales improvement upon showroom maturity and higher old gold exchange.

Gold prices moved southwards in Q2 based on muted gold demand globally and in lndia. Gold prices were comparatively lower by around 3 per cent in Q2 as against Q1 which also helped in volume growth, the company said.

During Q2, Senco Gold launched 2 own showrooms, one at Raipur (Chhattisgarh) and another at Chandigarh respectively; and 1 franchisee showroom at Arrah (Bihar)taking the total number of showroom to 145.

Senco Gold is a pan-India jewelry retailer with a strong brand presence. The company has been growing steadily in recent years and is well-positioned to benefit from the growing demand for gold jewelry in India.

Senco Gold boasts of being one of the top-2 as regards revenue share in the ~Rs 800 billion eastern market, abetted by strongest brand accessibility vs peers, in terms of product, price & penetration, according to analysts at Emkay Global Financial Services.

According to analysts at the brokerage firm, growth headroom is huge, as its market share is still at a mid-single-digit in the East, and focused efforts are afoot to capitalize on non-East prospects. Better access to capital, upbeat franchisee interest and shift to organized should drive a strong revenue-led EPS CAGR of >20 per cent for Senco in FY23-26E, analysts said.

Growth would be backed by near-equal input from new stores and SSG. Senco follows hygiene practices for sourcing/hedging gold (5 per cent stated policy), thus reducing the commodity’s volatility risk. Unit metrics are better than/in line with peers’ (ex Titan) and should further improve with rise in franchisee mix, the brokerage firm had said in its initiate coverage report dated September 20, 2023. However, stock was trading above analyst’s target price of Rs 630 per share.