Shares of Senco Gold tumbled as much as 14.8 per cent on Monday to Rs 304.5 on the BSE, extending losses to nearly 32 per cent over two sessions after the company reported a sharp 69.3 per cent year-on-year (YoY) drop in its third-quarter profit after tax (PAT).
The jewellery retailer’s PAT slumped to Rs 33.48 crore in the October-December quarter, compared to Rs 109.32 crore in Q3FY24. Adjusted PAT also declined 50.9 per cent YoY to Rs 53.74 crore. Despite robust revenue growth of 27.3 per cent to Rs 2,102.55 crore in the third quarter, profitability was hit by higher costs, declining margins, and losses tied to customs duties, the company said.
Senco Gold’s gross margin contracted 740 basis points YoY to 11.3 per cent , largely due to customs duty-related inventory losses of Rs 276 crore and gold price hedging costs exceeding Rs 500 crore. The company’s EBITDA declined 55.8 per cent YoY to Rs 79.96 crore, with adjusted EBITDA falling 40.4 per cent to Rs 107.55 crore. The EBITDA margin shrank to 3.8 per cent from 11.0 per cent a year earlier.
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, implying a 31 per cent potential upside from current levels.
While revenue growth remains strong, the sharp contraction in gross margins and hedging-related costs raise concerns over the company’s margin trajectory, the brokerage said. Motilal Oswal slashed its earnings estimates for FY25-FY27 by 25 per cent -30 per cent , citing uncertainty over operating margins and slower same-store sales growth (SSSG) compared to peers.
Brokerage Emkay Global also expressed concerns over margin volatility but maintained a more balanced outlook. “Senco’s reported Q3 EBITDA missed our estimate by about 500bps. However, most of the miss was led by hedging loss in the current quarter and hedging gain in the base quarter, as adjusted gross-margin (GM) decline was limited to only 100bps,” the brokerage said. It noted that while the sharp GM fluctuations are concerning, Senco attributes this to a highly volatile gold-price environment.
Emkay cut its PAT estimates by 13 per cent -16 per cent and reduced its target price by 23 per cent to Rs 600 due to weaker profitability and return on capital employed (ROCE). However, the brokerage said the nearly 50 per cent correction in Senco’s stock from its 52-week high appears excessive. “An assuring explanation for the margin volatility should be the key catalyst for a re-rating,” Emkay added.
Despite the weak quarterly performance, the company remained optimistic. “We remain confident… in achieving a 7 per cent -8 per cent EBITDA margin annually, excluding any one-off events,” CFO Sanjay Banka said. He attributed the lower margins in the third quarter to customs duties but expects improvement in Q4 and beyond.
Senco Gold’s stock has been in freefall since its Q3 earnings were announced post-market hours on February 13. Shares have plunged from Rs 446.95 to Rs 304.5, marking a 32 per cent decline in just two sessions. Over the past year, the stock has lost 15.34 per cent , while in the last six months, it has dropped 40.49 per cent . However, over a three-year period, shares are still up 109.31 per cent .
