Senco Gold jumps 5%, hits new high on healthy outlook; zooms 212% in 1 year

Shares of Senco Gold hit a high of Rs 1,252.10, as they rallied 5 per cent on the BSE in Monday’s intra-day trade on healthy outlook. Thus far in the calendar year, the stock of this Jewellery company has surged 75 per cent, as compared to 12.3 per cent rise in the BSE Sensex. In the past one year, the stock has zoomed 212 per cent, as against 21 per cent rally in the BSE benchmark index.

Senco offers an extensive range of jewellery, including gold, diamond, silver, platinum, as well as precious and semi-precious stones. Senco’s brand portfolio includes “Everlite” focused on lightweight jewellery; “Gossip” the silver and costume jewellery brand; and “Aham” catering to men. The company also has Vivaha and Rajwada collections, which are premium wedding jewellery range. Senco is one of the largest organised jewellery retailers in eastern India.

To enhance domestic value addition in gold and precious metal jewellery, government of India reduced customs duties on gold and silver to 6 per cent and on platinum to 6.4 per cent from 15 per cent earlier. This reduction is expected to galvanize demand in future, especially the pent-up demand for the June quarter (Q1). With lower gold prices, jewellery companies anticipate more footfalls and increased market share for organized players.

However, custom duty reduction will impact inventory valuation and will impact the gross margin and earnings before interest, tax, depreciation and amortization (EBITDA) in next 2 to 3 quarters. The management said the company is working out action plans to mitigate this impact to achieve the targeted EBITDA and profit after tax with commensurate growth over last year.

The management had said the company is preparing for the upcoming festive season in Q2 & H2, including Teej, Durga Puja, Navratri, Dhanteras/Diwali, and most importantly the wedding season.

Looking ahead to 2023-2024, the Senco Gold anticipates a year of growth and opportunity, underpinned by favourable market conditions and a strategic emphasis on innovation and sustainability. 

The jewellery markets, both globally and in India, are expected to continue their growth, driven by rising disposable incomes, increasing fashion awareness, and the enduring cultural significance of jewellery in Indian society. This positive environment provides a strong foundation for the company to expand its market share and explore new growth avenues.

The Indian jewellery industry is on a consistent growth trajectory having grown at 8 per cent compound annual growth rate (CAGR) over 2018 to 2023 and likely to touch $145 billion by 2028, driven by an accelerated CAGR of 16 per cent. 

Regulatory developments, like compulsory hallmarking, mandatory HUID hallmarking on every jewellery, antimoney laundering regulations, prohibitive regulations and limits on cash transactions, are creating a favourable environment for organized players. The share of organized retail jewellers is likely to cross 60 per cent by 2035, Senco Gold said.

Increasing regulations in the jewellery retail industry, aimed at improving transparency and standardisation, over the recent years have accelerated the shift in the market share from the unorganised players to organised ones. The industry tailwinds are expected to benefit the organised jewellery retailers like Senco over the medium term, supported by its expanding retail presence. An expected rise in the share of studded jewellery is also likely to increase Senco’s margin over the medium term, according to analysts.