Senco Gold shares rebound 10% from recent 52-week low; brokerage sees more upside

Shares of Senco Gold Ltd climbed 4.22 per cent on Thursday to settle at Rs 335.65. At this closing value, the stock has recovered 10.23 per cent from its one-year low of Rs 304.50, seen a few days earlier on February 17, 2025.

Bourses BSE and NSE have put the securities of Senco Gold under the short-term ASM (Additional Surveillance Measure) framework. Exchanges put stocks in short-term or long-term ASM frameworks to caution investors about high volatility in share prices.

SBI Securities has maintained its 'Buy' call on the jewellery maker with a revised target price of Rs 431 for 12-18 months, implying an upside potential of 28 per cent.

Sharing the near-term outlook, the domestic brokerage said the company has maintained its topline growth guidance of 18-20 per cent for FY25. "It has guided for slightly lower margins due to hedging loss impact on account of high gold prices. The adjusted EBITDA margin guidance is revised lower to 6.5-6.8 per cent for FY25 which will gradually improve to the earlier guided range of 7-8 per cent. Gross margin is also expected to come back to 14-15 per cent level going ahead. Senco will continue to increase diamond jewellery sales mix to improve margins while making charge will remain stable at 10-11 per cent," it stated.

"The company has opened 7 COCO, 4 franchise showrooms and 1 international showroom in 9MFY25 taking the total store count to 171 as of Dec'25. It will open another 8-10 stores in Q4 FY25, including 5-7 franchise stores," the brokerage also said.

"The company has guided to improve diamond jewellery sales in Q4 FY25 to improve margins. As of Feb'25, the stud ratio has seen improvement to 10.7-10.8 per cent and diamond jewellery sales has grown 59 per cent YoY (year-on-year)," SBI Sec further stated.

Senco recorded the highest-ever Q3 revenue driven by robust gold demand on account of the festive season. Gold, diamond, silver and gossip jewellery sales grew 21 per cent/9 per cent/35 per cent/18 per cent YoY, respectively. However, hedging losses and custom duty cut impact led to a YoY decline in the operating profit.

In an earnings call, CFO Sanjay Banka said, "Due to MCX future position, we had a loss on account of hedge position. Technically, we can't call it loss, we call it cost of the hedging. And the total impact in Q1 was around Rs 95 crore. Overall, Rs 95 crore to Rs 100 crore has been the impact in Q1, Q2 and Q3 all taken together. The entire loss due to hedging, as well as a significant portion of the gold metal loan, remains unhedged, so that all costs are loaded on the inventory, while there will be a realization gain on account of increase in the gold prices, it is countered by the loss on account of hedge position. Overall, due to the netting of the hedge accounting impact, the results may not be perfectly aligned within the same quarter."

As of December 2024, promoters held a 64.11 per cent stake in the company.