Senco Gold extends rally, up 33% in 2 days; Emkay sees 15.6% upside

Senco Gold shares extended its rally on Tuesday as they soared as much as 12.03 per cent to hit a fresh record high of Rs 1,065.65 per share.

Senco Gold shares have rallied 32.85 per cent in the previous two trading sessions.

The surge comes after the company reported 39 per cent growth on a yearly basis in revenue for the March quarter(Q4FY24).

The management has an optimistic outlook for the financial year 2024-25 (FY25), starting from Q1FY25 which has local new years (like Poila Baisakh/ Ugadi/ Baisakhi) and Akshay Tritiya starting from May 10 alongwith upcoming marriage season acting as tailwind for growth.

At 12:50 pm, Senco Gold was trading 6.95 per cent higher at Rs 1,017.30 per share, as compared to 0.77 per cent decline in the S&P BSE Sensex. 

Brokerage outlook

Brokerage firm Emkay noted that Senco Gold stock experienced a positive intra-day reaction following a beat to its estimates and its superior SSG performance compared to other listed jewellery peers in the fourth quarter of the financial year 2024 (Q4FY24).

Despite the robust performance, the stock's valuations remain notably discounted compared to its peers in the jewellery sector, despite demonstrating consistent growth historically, with a 16 per cent to 20 per cent revenue and profit after tax (PAT) compound annual growth rate (CAGR) over financial year 2015-2024 estimate (FY15-24E), and similar growth prospects in the medium term. 

Emkay analysts believe the increasing studded mix is expected to contribute to approximately 20 per cent growth in topline, facilitating a 23 per cent to 27 per cent earnings before interest, tax, depreciation and amortisation/profit after tax compound annual growth rate (EBITDA/PAT CAGR) over financial year 2024-2026 estimate (FY24-26E).

Considering these factors, Emkay has adjusted its target price upward by 19 per cent to Rs1,100 per share, considering a 2-3 per cent earnings per share (EPS) change and an approximately 15 per cent increase in the target price multiple to 29 times financial year 2026 estimate earnings per share (FY26E EPS). 

Furthermore, the brokerage firm said that sustained execution and expansion into non-East geographies could potentially lead to further re-rating upside for the stock.