At 52-week low! Senco gold shares extend post-Q3FY25 results selling, tank 32% in 2 sessions

Shares of Senco Gold extended their sharp decline on February 17, tumbling nearly 15 percent to its 52-week low after the jewellery retailer reported a steep drop in profitability for the December quarter (Q3FY25). This follows a 20 percent decline in the previous session on February 14, bringing the total two-session loss to approximately 32 percent.

Steep Drop in Profitability

Senco Gold’s consolidated profit after tax (PAT) plunged by over 69 percent year-on-year (YoY) to ₹33.48 crore in Q3FY25, compared to ₹109.32 crore in the same quarter last year. The company attributed this decline to elevated costs, margin compression, and significant inventory losses tied to customs duties.

Despite the weak bottom-line performance, revenue from operations surged 27.3 percent YoY to ₹2,102.5 crore—the highest-ever quarterly revenue—compared to ₹1,652.2 crore in Q3FY24. However, earnings before interest, tax, depreciation, and amortization (EBITDA) saw a sharp contraction of 56 percent, falling to ₹79.96 crore from ₹181.1 crore a year earlier. The EBITDA margin shrank significantly to 3.8 percent from 11.0 percent.

Senco Gold’s gross margin also suffered, contracting by 740 basis points (bps) YoY to 11.3 percent, largely due to customs duty-related inventory losses of ₹276 crore and hedging costs exceeding ₹500 crore.

Company Expects Margins to Stabilize

Despite the challenges, the company remains optimistic about a recovery in margins going forward. It expects EBITDA margins to normalize between 7 percent and 8 percent in Q4FY25 as the impact of customs duties subsides.

“We remain confident in the long-term potential of the Indian gems and jewellery industry, currently valued at $85-$90 billion. The lower EBITDA and PAT margins in Q3 were primarily due to customs duty-related impacts, but on an adjusted basis, our nine-month EBITDA margin stood at 6 percent. We expect to achieve 7-8 percent EBITDA margins in Q4 and beyond, driven by our brand positioning and operational efficiencies,” said Sanjay Banka, CFO of Senco Gold.

He further emphasized that quarterly EBITDA fluctuations are influenced by gold price volatility, hedging activities, and accounting standards, but the company expects annualized EBITDA margins to remain in the 7-8 percent range.

Expansion Plans and Strategic Initiatives

Senco Gold continues to expand its showroom presence, increasing its total count to 171, including 70 franchisee outlets. Over the past nine months, the company has opened 12 new showrooms, seven of which are company-owned. Looking ahead, it plans to launch 8-10 new showrooms in Q4FY25, including 5-7 franchise outlets, in line with its earlier growth strategy.

Suvankar Sen, Managing Director & CEO of Senco Gold, highlighted the company’s future plans, stating, “We are pleased to announce the incorporation of our wholly owned subsidiary, Sennes Fashion Limited, which will cater to the consumer lifestyle segment. This strategic initiative will include premium leather accessories, lab-grown diamond jewellery, and perfumes, allowing us to diversify our offerings and remain aligned with evolving consumer trends.”

Brokerage Views: Downgrades and Cautious Outlook

Brokerages have expressed concerns over Senco Gold’s margin volatility, leading to target price revisions.

Motilal Oswal: The brokerage downgraded the stock from ‘buy’ to ‘neutral,’ citing weak earnings visibility and margin fluctuations. It slashed its earnings estimates for FY25-FY27 by 25-30 percent and set a target price of ₹400, implying a 31 percent potential upside from current levels.

Emkay Global: While acknowledging the margin pressures, Emkay maintained a more balanced stance, noting that the reported Q3 EBITDA missed its estimates by 500 bps. However, it pointed out that most of the shortfall stemmed from hedging losses rather than fundamental operational weaknesses. The brokerage cut its PAT estimates by 13-16 percent and reduced its target price by 23 percent to ₹600, citing weaker profitability and return on capital employed (ROCE). Despite the weak quarter, Emkay stated that the nearly 50 percent correction in Senco’s stock from its 52-week high appears excessive, and a clearer explanation of margin volatility could trigger a re-rating.

Stock Performance: Five-Month Losing Streak

Senco Gold shares hit an intra-day low of ₹304.50 on February 17, marking a new 52-week low. The stock has now plummeted over 60 percent from its peak of ₹772, recorded in October 2024.

Over the past year, the stock has declined nearly 9 percent. The losses have accelerated in February, with the stock falling over 32 percent so far. This marks the fifth consecutive month of decline since October 2024, during which the stock has lost a cumulative 28 percent. It fell over 12 percent in January, 7 percent in December, almost 6 percent in November, and around 15 percent in October.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.