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Weak print; margin volatility continues

* Senco Gold (SENCO) delivered strong consolidated revenue growth of 67% YoY to INR31b (est. INR29b) in 1QFY27, ahead of peers. SSSG stood at 39%, aided by festive and wedding demand and a higher contribution from lightweight jewelry. Despite a ~61% YoY increase in gold prices, gold jewelry volumes remained broadly stable, highlighting resilient underlying demand. Senco recorded ~25% YoY growth in July-August and guides for ~20% revenue growth in FY27.

* The company opened eight stores during the quarter, taking the total store count to 209 (105 COCO, 89 FOCO, 13 Sennes and 2 Dubai). It plans to add another 12-15 stores during the remainder of FY27, with increasing focus on franchise-led expansion and Tier-2/3 cities.

* Despite strong revenue performance, there was a miss in margins. GM (adj. for inventory gains) contracted sharply by 240bp YoY to 15.7% (est. 16%; 22.4% in 4QFY26), impacted by gold price volatility, discounting and higher contribution from the old-gold exchange scheme. The company maintained ~50% hedging during the quarter, while customs duty-related inventory gain stood at ~INR120-150m. Adj. EBITDA margin declined 250bp YoY to 6.5% (est. 8.7%), also impacted by high operating expenses. Management maintained its 7.5-7.8% EBITDA margin guidance. They expect margin recovery going ahead as inventory gains accrue and high other expenses normalize. We model 7.5% EBITDA margin for FY27/28.

* Given the inconsistencies in operating performance and low hedging ratios, we remain cautious on SENCO’s operating margin performance going ahead. Reiterate Neutral rating with a TP of INR385 (15x Sep’28E EPS).

Strong revenue performance; miss in margin

* Robust sales growth: Senco reported strong consolidated revenue growth of 67% YoY to INR31b (est. INR29b), backed by a favorable festive calendar, including Akshaya Tritiya, Poila Boishakh and Baisakhi, as well as the summer wedding season. SSSG stood at 39% vs. 33% for TTAN, 28% for Kalyan and 46% for PN Gadgil. Titan (Jewelry standalone, ex-bullion), Kalyan, and P N Gadgil (retail) delivered revenue growth of 38%, 47%, and 54%, respectively, in 1Q. Despite ~61% YoY increase in average gold prices, gold jewellery volumes remained broadly stable, reflecting resilient demand and a favourable product mix toward lightweight, fancy and dailywear jewellery. Retail sales grew 50% YoY, while diamond jewellery sales increased 43% YoY.

* Margin pressure amid gold price volatility and discounting: Consolidated gross margin (adj. for inventory gains) contracted sharply by 240bp YoY to 15.7% (vs. est. 16%; 22.4% in 4QFY26), impacted by gold price volatility, discounting and higher contribution from the old-gold exchange scheme. SENCO maintained a ~50% hedging ratio in 1Q, while the customs dutyrelated inventory gain was ~INR120-150m. Employee expenses rose 22% YoY, while other expenses increased 86% YoY to INR2.3b, driven by marketing, store renovations and customer offers. Adj. EBITDA margin contracted 250bp YoY and 730bp QoQ to 6.5% (est. 8.7%), reflecting gross margin pressure and high opex.

* Miss in profitability: Adj. EBITDA grew 21% YoY to INR2b (est. INR2.5b), while PAT declined 3% YoY to INR1b (est. INR1.4b) and APAT grew 2% YoY.

Valuation and view

* We maintain our EPS estimates for FY27 and FY28.

* SENCO’s gross margins have historically been volatile, reflecting the company’s low level of hedging and resultant inventory gains. Management aims to sustain 7.5-7.8% EBITDA margin; however, we model 7.5% for FY27/28 (close to average of FY23-25).

* We model revenue/EBITDA CAGR of +20%/-4% over FY26-28. We reiterate our Neutral rating with a TP of INR385 (15x Sep’28E EPS).

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