Shares of Senco Gold Ltd experienced a sharp decline during Wednesday's afternoon trading session, plummeting by 12.95 per cent to hit a low of Rs 349.25 on the BSE. This significant drop occurred despite the Kolkata-based jewellery retailer announcing strong year-on-year (YoY) revenue growth for the June quarter (Q1 FY27).
Motilal Oswal Financial Services Ltd (MOFSL) reported that Senco Gold's consolidated revenue reached Rs 3,100 crore in Q1 FY27, marking an impressive 67 per cent YoY increase. This figure surpassed the brokerage's estimate of Rs 2,900 crore. The robust revenue performance was primarily attributed to a favorable festive calendar, including Akshaya Tritiya and Poila Baisakh, alongside the commencement of the summer wedding season. Same-store sales growth (SSSG) stood at a strong 38 per cent YoY, outperforming some peers like Titan (33 per cent) and Kalyan (28 per cent).
Why Did Senco Gold Shares Fall?
Despite the strong topline growth, the company's margins faced considerable pressure in Q1 FY27. According to MOFSL, Senco's pre-quarter business update indicated that while gold prices remained elevated YoY, they saw a sequential decline. Additionally, a customs duty increase resulted in approximately 9 per cent higher domestic gold prices.
MOFSL noted that the benefit from higher gold prices was expected to materialize over Q1-Q2, supported by the company's approximately 50 per cent hedging position. However, the decline in gold prices during the quarter, combined with heavy discounting, likely limited this benefit and weighed heavily on Q1 margins. Senco anticipates that as inventory is liquidated and hedges unwind, the benefits will become more visible in Q2.
Margin Contraction and Profit Decline
- Consolidated gross margin contracted sharply by 300 basis points YoY to 16.1 per cent, compared to 22.4 per cent in Q4 FY26.
- Employee expenses rose 22 per cent YoY, while other expenses surged 86 per cent YoY.
- EBITDA margin contracted by 300 basis points YoY and 680 basis points QoQ, settling at 7 per cent.
- EBITDA grew 16 per cent YoY to Rs 210 crore, falling short of the estimated Rs 250 crore.
- Adjusted Profit After Tax (APAT) declined 3 per cent YoY to Rs 100 crore, significantly below the estimated Rs 140 crore and Q4 FY26's Rs 160 crore.
Motilal Oswal Financial Services has maintained its 'Neutral' rating on Senco Gold, setting a 12-month target price of Rs 430.
Ravi Singh, Chief Research Officer at Master Capital Services, echoed these concerns, highlighting that the company's profit decreased despite robust sales. "The Q1 numbers indicate that margin pressure is currently offsetting the benefit of higher sales. Investors should therefore wait for better clarity on profitability before adding aggressively. The stock may retest its support around Rs 320, which could offer a more attractive entry point if the support holds," Singh advised.