 "Senco Gold share price tanks 32% in 2 days, hits 16-month low on weak Q3")
Senco Gold share price hit a 16-month low of Rs 304.50 per share as it slipped 15 per cent on the BSE in Monday's intraday trade. Senco Gold share extended the decline it clocked on Friday after the company reported a weak operational performance in the December 2024 quarter (Q3FY25).
In the past two days, Senco Gold stock price has tanked 32 per cent and was trading at its lowest level since October 2023. The stock has tanked 61 per cent from its 52-week high level of Rs 772, which it hit on October 7, 2024. The stock of the jewellery company was trading 46 per cent below its qualified institutional placement (QIP) issue price of Rs 562.50 (adjusted to stock split). On January 31, 2025, the stock had turned ex-stock split in the ratio of 1:1 i.e. stock split from Rs 10 to Rs 5.
At 01:43 PM, Senco Gold share was trading 11 per cent lower at Rs 318.20 amid heavy volumes. Roughly 4.36 per cent of total equity of the company has, together, changed hands on the NSE and BSE.
The company's adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) margin contracted to 5.1 per cent in the December 2024 quarter (Q3FY25) from 11 per cent in Q3FY24. The company had guided for an Ebitda margin in the range of 7 per cent and 8 per cent.
Besides, the company's profit after tax declined 69 per cent year-on-year (Y-o-Y) to Rs 33.48 crore, compared to Rs 109.32 crore in Q3FY24. The company attributed its weak Ebitda and profit after tax (PAT) growth due to custom duty impact of Rs 57.4 crore.
The management, however, believes that as the full impact of the custom duty reduction has already been factored in the 9-month results, the company will be able to deliver 14-15 per cent gross margin and 7 per cent-8 per cent Ebitda margin in Q4FY25 and beyond. Besides, vibrant demand for gold jewellery amid the wedding season will likely aid the margins.
"While the management has maintained its Ebitda margin guidance of 7-8 per cent for Q4FY25 and the coming years, the unsatisfactory explanation for the sharp contraction in gross margin (GM) in Q3 has undermined our confidence in the margin trajectory going forward," analysts at Motilal Oswal Financial Services (MOFSL) said in their Q3 result update.
Senco Gold's peers did not see a similar volatility in margins due to gold inflation. "While peers are also engaged in gold hedging, such hedging costs were not observed. Given the uncertainty around operating margins and slower SSSG than peers, we cut our EPS estimates 25-30 per cent for FY25-27," MOFSL said.
Those at Emkay Global observed: "Senco Gold has maintained the growth outlook of ~20 per cent with 18-20 annual adds. The adjusted gross margin decline is due to higher mix of low-margin franchisee/exports and lower studded mix, which the management believes will gradually recoup hereon".
However, analysts at the brokerage see the ~50 per cent correction in Senco Gold share price (from its 52-week high) as unwarranted, and think an assuring explanation for the margin volatility should be the key catalyst for a re-rating.
Notably, Senco Gold reported its highest-ever quarterly performance with 27.3 per cent Y-o-Y jump in revenue from operations at Rs 2,102.5 crore in Q3FY25, as against Rs 1,652.2 crore in the year-ago quarter.