Company Update : Senco Gold by Motilal Oswal Financial Services Ltd
Strong topline growth supported by healthy SSSG
Gold price trends
* Gold prices remained elevated, rising over 62% YoY (+1% QoQ) amid geopolitical situations. Indian gold prices now reflect the 9% increase in customs duty (from 6% to 15%). The benefits of the higher customs duty are likely to accrue over 1Q and 2Q, net of any impact from a decline in prices, given the current hedging level of 50%.
* However, given the heavy discounting of gold prices during the quarter, 1Q margins are likely to remain under pressure despite the customs duty increase.
Financial and operational performance
* 1QFY27 delivered robust revenue and SSSG growth, supported by a favorable festive calendar, including Akshaya Tritiya, Poila Baisakh, Baishaki, Bihu, and the onset of the summer wedding season. Performance remained resilient despite Adhik Maas and the increase in customs duty.
* In 1QFY27, SENCO’s revenue grew 60% YoY and 53% QoQ (45% YoY in 4QFY26; 30% in 1QFY26), while retail sales grew 48% YoY and 51% QoQ.
* SSSG in 1Q stood at 38% YoY (34% QoQ) vs 35% in 4QFY26 and 20% in 1QFY26.
* Diamond jewelry (value) growth stood at 40% YoY, while volume growth was 15% YoY. This growth was driven by volume expansion, a richer product mix, traction in lower-priced products below the INR50,000 range under the Everlite segment, and new design launches. The stud ratio stood at 11%.
* Old gold exchange contributed to ~43% of total sales in 1QFY27. SENCO launched an attractive ‘0% deduction’ campaign in line with the appeal of the Honourable Prime Minister.
Outlook
* 2QFY27 is expected to be seasonally softer, while consumer demand is likely to be driven by the monsoon and festivals, with gold bookings expected to pick up for 3Q.
* The company will focus on inventory optimization, lightweight and 9K collections, and margin protection.
* The company is on track to open 12-15 showrooms over the next three quarters, with a greater focus on franchise stores.
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