Multibagger stock: Senco Gold share price jumps 10% in three sessions; analysts expect up to 27% more upside

Senco Gold share price rallied over 4% on Friday, extending gains for the third consecutive session. The multibagger stock has surged more than 10% in the last three sessions and 14% in one month. Senco Gold shares have given more than 178% in the past twelve months.

The jewellery maker Senco Gold Q1 results beat street estimates led by gross margin improvement despite weak sales performance. The company’s consolidated revenue from operations rose 7.5% to ₹1,403.89 crore in the quarter ended June 2024. Retail sales growth was higher at 9.6%, with same-store sales growth (SSSG) at 4%, on a year-over-year (YoY) basis.

The bottom line or the net profit of the company in Q1FY25 surged 85.3% YoY to ₹51.27 crore. Consolidated gross margin expanded 480 bps YoY and 20 bps QoQ to 17% despite fewer wedding days and competitive pressure.

At the operational level, consolidated EBITDA improved by 61.82% YoY to ₹108.73 crore, while EBITDA margin expanded 260 bps YoY to 7.7%.

Senco Gold has retained its FY25 growth outlook of 18-20%. The company added 6 stores (4 owned out of which 1 in Dubai and 2 franchisees), bringing the total count to 165 stores. The company remains on track with its plan to open 18-20 stores in FY25.

What analysts say?

“The EBITDA margin beat of ~250 bps was led by better franchisee terms, lower discounting/ better gold premium, and a low-margin base as hedging remained at ~95% in Q1. While the duty cut significantly improves medium-term prospects, Senco expects a short-term hedging loss of ₹0.5 billion, which shall be distributed over the next 2-3 quarters,” said Devanshu Bansal, Research Analyst at Emkay Global Financial Services.

Senco’s margin beat drives a ~12% upward revision to Emkay Global’s earnings estimates. According to Bansal, Senco Gold stock is trading at a considerable discount to peers despite similar or better operating performance.

The brokerage firm has a ‘Buy’ rating on Senco Gold shares and increased its target price on the stock to ₹1,400 per share, implying an upside potential of more than 27% from Wednesday’s closing price.

Motilal Oswal Financial Services believes Senco Gold is one of the most promising players in the organized retail jewelry market.

“In line with the formalization in the jewelry market, we continue to see store expansion-led growth for Senco Gold (estimate addition of 34 stores during FY24-26E, taking the total to 193 stores). We estimate a CAGR of 18% / 22% / 27% in revenue / EBITDA / adj. PAT over FY24- 26. The stock is currently trading at 30x FY26E EPS, with RoE / RoIC of 17% / 13% in FY26E,” Motilal Oswal noted.

The brokerage firm reiterated its ‘Buy’ rating with Senco Gold share price target of ₹1,350 per share, expecting an upside potential of nearly 23%.

At 10:20 am, Senco Gold shares were trading 1.00% higher at ₹1,110.80 apiece on the BSE. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.