SENCO - Senco Gold Limited Share Price

During the Q3 FY26 earnings call, management presented a strong outlook for Senco Gold Limited, highlighting a historic quarter with significant growth figures. Revenues surpassed Rs.3,000 crores, marking a 50% year-over-year increase. The EBITDA surged to Rs.404.6 crores (up 406% YoY) and PAT reached Rs.264 crores, representing a staggering 689% growth. Adjusted EBITDA margin was reported at 13.2%.

Management attributed the impressive margins to a greater proportion of direct store sales (65% of total revenue), an improved product mix including lightweight and diamond-studded jewellery, which saw a 38% rise in value. They reinforced their commitment to adapting to consumer needs, introducing a range of jewellery from 9-carat to lightweight options to remain budget-friendly.

On future guidance, the company projected a conservative revenue growth of over 25% for Q4, buoyed by the wedding season and upcoming festive events. For the fiscal year 2027, Senco targets a revenue growth of over 20% and aims to maintain a sustainable EBITDA margin between 7.5% and 7.8%. Furthermore, they plan to add 18 to 20 new stores, focusing on a mix of franchise and own outlets.

Key forward-looking points include:

• Expected revenue growth of 25%+ in Q4 FY26.
• Sustainable EBITDA margin guidance of 7.5% to 7.8% for FY27.
• Projected growth of 20%+ for the upcoming year.
• Expansion of the store network to over 200 by the end of FY26, with continued focus on regional consumer preferences.
• Integration of Melorra to attract younger consumers, enhancing product offerings in line with market trends.

Here are the major questions asked during the Q&A section of the earnings call along with their detailed answers:

1. Question from Mihir Shah (Nomura): "Given the gold prices where they are, why is the 25% sales growth guidance for Q4 seemingly low?"

   Answer: I maintain that there won't be a material drop in average selling prices. The conservative 25% growth guidance is primarily due to seasonal effects, like March's Holi and the upcoming festival Akshay Tritiya when consumers tend to delay purchases. While Q3's growth was buoyed by Dhanteras, our guidance remains cautious. As we approach the quarter's end, this percentage could potentially increase to 30%-35%.

2. Question from Sanjay Banka (CFO): "Could you confirm the EBITDA margin guidance for FY "˜27?"

   Answer: Yes, our sustainable EBITDA margin guidance for FY "˜27 is in the range of 7.5% to 7.8%. This guidance takes into account the current elevated price levels of gold and our ongoing operational improvements.

3. Question from Bharat (MC Pro Research): "What is the level of inventory hedging currently, and what is your plan for the next fiscal year?"

   Answer: Our current hedging percentage is within 55% to 60%, down from historical levels of 80% to 90%. This decision is based on recent price volatility and liquidity concerns. We plan to reassess this strategy and potentially increase the hedging proportion to 80%-90% when prices stabilize.

4. Question from Vijay Chauhan (Right Horizons PMS): "Can you clarify if the gross margin has any component of inventory gain?"

   Answer: There are no inventory gains hidden in our gross margins. The term 'realisation gain' mentioned earlier refers to inventory sold at higher prices compared to its cost. This does not reflect hidden profits but rather the impact of price fluctuations on our inventory at the time of sale.

5. Question from Rupesh (Long Equity Partners): "What will be your store additions in the upcoming year?"

   Answer: We aim to open 18 to 20 new stores next year, focusing more on franchisee locations than proprietary ones, allowing us to efficiently expand our footprint while minimizing capital expenditures.

6. Question from Devanshu Bansal (Emkay Global): "What initiatives are being taken to improve customer advances under savings schemes?"

   Answer: While we experienced lower customer advances in Q3 due to redemption during Dhanteras, we're implementing attractive fixed-rate schemes to encourage participation. Our goal is to drive adoption of these schemes moving forward, aiming for a target to maximize these customer deposits in the upcoming months.

7. Question from Jinesh (Individual Investor): "What is your current hedging policy as of now?"

   Answer: We currently maintain a hedging ratio of 55% to 60% under a Board-approved policy. This will remain until the gold price stabilizes, after which we plan to revert to higher ratios up to 90% as liquidity allows.

Each answer maintains a focus on directness and clarity to ensure a comprehensive understanding of the company's strategies and guidance.