Senco Gold shares surge 9% to 7-week high after net profit jumps 85% YoY in Q1

Shares of Senco Gold, a leading jewellery retailer in India, surged 9% in early morning trade today, reaching a 7-week high of ₹1,129 apiece after the company reported strong financial results for the quarter ending in June.

Strong Financial Performance

The company saw a 7.5% increase in consolidated revenue from operations, totaling ₹1,403.89 crore. Retail sales growth on a year-over-year (YoY) basis was even higher at 9.6%, with same-store sales growth (SSSG) recorded at 4%.

Senco Gold highlighted that its sales performance during Akshay Tritiya (the first 41 days of Q1) met expectations, showing an impressive YoY growth of 21% despite challenges such as extreme heat, Lok Sabha elections, and fewer wedding days.

The company also noted strong performance during the Bangle Utsav held during Poila Baisakh and Akshay Tritiya, which contributed to healthy margins. The average transaction value (ATV) increased by 12% to ₹73,900, while the average selling price (ASP) rose by 13% to ₹49,000, according to the company's earnings filing.

On the profitability front, consolidated EBITDA improved by 61.82% YoY, climbing from ₹67.20 crore to ₹108.73 crore. EBIT grew by 60.6%, rising from ₹64.09 crore to ₹102.96 crore, with an EBIT margin of 7.3%. At the bottom line, the company’s profit after tax (PAT) surged by 85.3% YoY to ₹51.27 crore.

Expansion and Growth Strategy

During the quarter, Senco Gold expanded its showroom network to 165 locations, adding six new showrooms, including one in Dubai, and two franchisees. The company has a robust pipeline for new showrooms under the COCO (Company Owned Company Operated) and FOFO (Franchisee Owned Franchisee Operated) models, aligning with its growth strategy.

In line with its Environmental, Social, and Governance (ESG) commitments, the company increased the percentage of sales from recycled gold (old gold from customers) from 32% to 35%, with approximately 43,000 customers benefiting from this offer in Q1.

Senco Gold is gearing up for the upcoming festive season in Q2 and H2, including Rakshabandhan, Independence Day, Teej, Durga Puja, Navratri, Dhanteras/Diwali, and the wedding season.

Additionally, the Indian government has reduced customs duties on gold and silver from 15% to 6% and on platinum to 6.4%, aiming to boost domestic value addition in gold and precious metal jewellery.

This reduction is expected to stimulate future demand, particularly the pent-up demand from Q1. With lower gold prices, jewellery companies anticipate higher footfalls and increased market share for organized players.

"In preparation for Q2, we continued to buy (including pricing of GML) gold, and our buy-sell ratio in Q1 was 1.3x, indicating higher buying. This price rise led to a realization gain as adjusted by hedging loss as our average inventory hedging was 95%. Due to hedge accounting and weighted average pricing for gold, margins reflect a stable/ consistent pattern over a period of 2 to 3 quarters over the inventory movement cycle," said Mr Sanjay Banka (CFO), Senco Gold.

"We are committed to a risk management policy as regards gold price volatility, and irrespective of gold price movement direction, we are always on the sell/short side, including unfixed GML," Sanjay Banka added.

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