Senco Gold: Upcoming gold story!

Stock Opportunities Untested - but worth a good look
50

Industry:

  • Gold prices surged globally due to geopolitical tensions, increased central bank purchases, and high Fed rates.
  • Domestic gold prices hit all-time high, impacting unorganized jewelers but benefiting listed ones.
  • Squeezed working capital due to higher margins for Gold Hedging and Gold Metal Loan (GML).
  • Optimistic outlook for FY 24-25, boosted by local new years and the upcoming marriage season.

Showroom Expansion:

  • 23 new showrooms launched, marking a 17% growth.
  • 4 showrooms opened in Q4.
  • Focus on East and North markets with strategic SENNEs stores in Kolkata.

image
image1692×592 76.8 KB

Business Performance:

  • Achieved 28% YoY revenue growth for full year, 39% YoY growth in Q4.
  • Despite rising gold prices, achieved 13% YoY gold volume growth and 19% YoY diamond volume growth.
  • Percentage of sales from old gold exchange increased from 29% to 32% YoY, with 65% from non-Senco customers, indicating a shift to organised markets.
  • SSSG contributed significantly to retail sales growth, with a 23% contribution in Q4.
  • Improved stud ratio to 11.4%, with own showrooms achieving 13.1%.
  • Introduced key offers to enhance footfall and sales.
  • Retained 2nd Most Trusted Jewellery Brand title and debuted on Deloitte’s luxury goods rankings.
  • Became the 1st Indian jewellery brand to join ONDC, supporting ‘Make in India’ initiative
21 Likes
52

Maybe it is no big deal but does anyone think, like me that High investment from China Saif Partners is a big risk?

3 Likes
53

What do you mean when you say Percentage of sales from old gold exchange increased from 29% to 32% YoY, with 65% from non-Senco customers, indicating a shift to organised markets. .
Understanding purpose
What is old gold exchange

54

great to see the company beats the 24% estimate. Excited to see how this story shapes up

4 Likes
56

SencoQ4Results
SencoQ4Results1920×2485 319 KB

5 Likes
60

Q4 FY24-

Guided for margin expansion from 7.3% to 8%

Guided- Top line-18-20%, Bottomline-15-20%

- Efforts to increase stud ratio by 1-3% annually to mitigate price pressure and improve gross margin and EBITDA.
Company added 23 showrooms in FY24. Total showroom count is 159. Company guided to open 20 showrooms in FY24 and exceeded the guidance.

  • Management plans to add between 15 to 20 new stores in the upcoming year.

Stud ration increased from 10.4% to 11.4%(In North- stud ratio is 17.2, higher than average). Stud ratio is less compared to Titan and Kalyan but the trajectory is upwards. Stud ratio is the % of diamonds in a gold ornament. Jewelers get more margins in diamonds. Hence, more the stud ratio better the profit margins.

- Focus on growth will be primarily in Eastern and Northern India, with a mix of West and South.

  • Optimum Gold Metal Loan (GML) percentage target is around 75% to minimize borrowing costs.

- Strategic locational advantage in Kolkata helps mitigate pressure on margins compared to competitors.

Revenue grew 40% and PAT grew 24% YoY. Senco grew faster than Titan and Kalyan in Q4. Senco exceeded the sales growth guidance of 20%.

Showroom growth of 17%, SSSG Growth of 19%, sales growth of 29%, EBITDA growth of 18.6% and PAT growth of 14.2% for the full year.

Company achieved 13% volume growth in Gold and 18% in Diamond

The Inventory value increased from 1,885Cr to 2,457Cr in anticipation of Akshaya Tritiya and higher gold price.

Inventory turnover ratio is 2.4x and inventory days is 151 days.

ROE went down from 19% last year to 15.7% due to high showroom roll-out

Key Financial Metrics:

  • Revenue growth of 28.5% in FY24

  • PAT growth of 14.2% in FY24

  • Total revenue of Rs. 5,240 crore in FY24

  • EBITDA margin at 7.3% with a target to increase to 8%

  • Average sale price (ASP) of Rs. 41,000 for the full year

  • Average ticket value (ATV) in the range of Rs. 63,000

  • Gross margin for the current year at around 15.3%

Management Commentary Highlights:

  • Senco Gold had a successful year post listing in FY24, focusing on wealth creation for shareholders and stakeholders.

  • Launched new initiatives like metaverse platform, ONDC enlistment, and tie-up with eBay for global market access.

  • Opened new stores in Central India and expanded product portfolio with 23 new collections.

  • Revenue from operations grew by 28.5% in FY24, with retail business growth at 25%.

  • PAT grew by 14.2% to Rs. 181 crore in FY24.

  • Focus on customer acquisition with 45-50% new customers and 55% repeat buyers.

  • Introduced new brand SENNES for lab-grown diamonds and leather accessories.

  • Emphasized premiumization, customer value chain, and brand positioning for ASP increase.

Insights into Business Verticals:

  • North region stores have a stud ratio of 17.2% and average sale per store of Rs. 27 crore, showing growth potential.

  • Retail growth in North at 22% with SSSG of 19%, indicating a growing business in the region.

  • Export income contributed to higher revenue growth in 4Q, with specific details on export income not provided.

Forward Guidance & Outlook:

- Focus on expanding in East and North regions, with plans to add 15-20 stores in the coming year.

  • Continued efforts to capture market share and stabilize profitability in the face of competition.

  • Opportunities for growth in North region, with a stud ratio of 17.2% and average sale per store of Rs. 27 crore.

  • Export income contributing to revenue growth, with potential for further expansion in the export segment.

Overall, Senco Gold had a successful year in FY24, with strong revenue growth, focus on customer acquisition, and strategic initiatives to drive business expansion. The company remains optimistic about future growth prospects and is committed to delivering value to shareholders.

13 Likes
61

Q4 FY24

Financials and Business

  • Competition by fellow jewellers to capture the growing market and the new demand is the reason margins are under pressure. Offers and discounts are being given which are driving the margins down
  • The inventory increase is because of new stores and gold price increasing, nothing to worry about
  • Inventory days stable at 2.41x
  • A lot of growth in Q3 came because of extended wedding days, rising gold prices and Akshaya Trittya.
  • Average blended sales per store is 35 to 36 crores whereas its 27 in north. There is room for growth.
  • Exports last year was 70 and this year 180 crores. This led to fall in margins because the margins are lower in exports around 6-7%( not too big of a difference)
  • Out of 1500 crores, 915 crores is gold metal loans which has an interest of 3.2-3.8% and wc funding rate is 9.8% and blended comes to 6-6.5%
  • Average Sale price is 41,000 which was 36,000 in the last 3 years. ATV also increased to 63,000 from 57,000 in last 3 years. It is important to note that this is the blended ASP and Gold Jewellery ASP are higher by Rs 9,000- to Rs 10,000.
  • Repeat buyers were around 47-53%
  • 35% of revenue should be franchise while 60% should be own. Balance from ecommerce etc.

Stores and SSSG

  • Store count: 159, 23 were opened and out of which 17 were COCO.
  • This year they entered the central market by entering Bhopal and Indore.
  • They already had a store in Raipur and now increased another one there.
  • The franchisees have been more focused on the Eastern India expansion while our journey of opening new stores, building the brand, getting our awareness levels high across the country has been focused on East, North and Central India.
  • We opened one store in the South in Bangalore as well, and one store in Pune.
  • the focus of 60% to 70% of your store openings be its own store or franchisee will be Eastern and Northern part of the country and 20% more so, will be on the Southern and Western part of the country. So, 70% to 80% Eastern and North, out of that again 40% to 50% is going to be East only, because we believe that there is still our scope in all the Eastern India states of Bihar, Odisha, Bengal, Assam, Chhattisgarh and further on to penetrate into the tire two, three, four towns and cities or the growing fact of the capital cities of East India also.

Outlook

  • The current year margin of 7.2% can become 8% in the future
  • 18-20% growth in topline and bottom line grow 15-20%
  • Add 10 COCO and 10 franchises in FY25, thats the goal. Its a conservative goal
  • Stable profitability in the coming 4-5 years when market share consolidated and organised players have taken over most of it.
  • Increase GML loans year on year to save interest costs. Rn it’s at 60% and FY25 the goal is to make it 75%. If this happens, the cost of borrowing can be 4.85%
  • Margins will be a cause of concern because the competitive intensity will increase and they said it will be mitigated by increasing stud ratio
  • A conservative approach of Margin improvement would be 30 basis points year on year.
  • SSSG will be 60/70% of the growth which is what ensures operating leverage.

Gold exchange

  • 32% of overall business is gold exchange, it was 25% two years ago.

Diamond and gold prices

  • Stud ratio for FY24 grown from 10.4% to 11.4%
  • The increase in gold prices is leading to lighter jewelry being worn which has more diamonds.
  • There is some inelasticity of demand because customers have to buy for the bride during the wedding irrespective of the price. So that has helped a lot for them and the ATV or average total value of wedding has increased.
  • Even though the prices have been on the upward trend has been seen and even if we look at the trend in the last two months with a big jump in the gold prices, it is this wedding Jewellery collection and the wedding Jewellery purchases that is showing a bigger traction compared to the lighter Jewellery sales
  • Stud ratio in north is 17.2%
  • A 100 basis point plus increase in stud ratio will lead to upward pressure on margins so if they achieve the same number like FY24, all else equal the margins will increase.

My thoughts:
I am quite happy with the results. A concern will be margins going ahead because the competitive intensity is here to stay. However, improving stud ratio is key and that depends on north stores mainly so let’s see how that goes.

Apart from that, a 20% guidance seems good and a little conservative. 20 stores being added+ SSSG can lead to higher growth but I am modeling my expectations with a 20% increase in topline.
the reason I think that COCO stores guidance aren’t as many FY24 is because of the emphasis on capturing TIER 2,3,4 cities which is mainly done by franchises.
Moreover, interest costs are at 2% of total revenue and with the increase of GML loans, I expect them to gradually fall and maybe fall to around 1.5% or so in the next 2-3 years.
Operating leverage aided by SSSG seems intact.
good quarter

14 Likes
62

SAIF Partners have exited completely.

3 Likes
63

Great news. This was an overhang for low PE on the stock Now hopefully, PE will get aligned with that of other Gold stocks.

7 Likes
64

What is the reason for such thing? Is SAIF not a good investment firm? Or people were waiting for it to book profits?

65

They are closing down their India fund

66

Need to understand how its new brand SENNES performs. Good analysis done in this video.

4 Likes
67

image
image813×976 177 KB

Senco Credit rating

Rise in share of studded Jewellery is also likely to increase Senco’s margin over the medium term.

Consumer business - Do check Kalyan and Titan - Senco seems like a Rerating candidate

5 Likes
68
1 Like
70

1. Business Performance

  • Retail Sales Growth: 11%
  • Same Store Sales Growth (SSSG): 4%
  • Akshay Tritiya Performance:
    • YoY Growth: 21%
    • Despite challenges: high heat wave, Lok Sabha elections, and low wedding days
  • Average Transaction Value (ATV) and Average Selling Price (ASP): Grew by 12%
  • Total Sales Growth: 9% YoY (including exports, e-commerce, corporate, digital products)
  • Marketing and Branding Strategies:
    • Attracted footfall during traditional New Years (Bihu, Gudi Padwa, Poila Baisakh, Baisakhi, Akshay Tritiya)
    • Launched new collections:
      • Gathbandhan Wedding Collection
      • Everlite Diamond Collections: Ribbon, Forest Queen, Pleat
  • Product Innovations:
    • New designs and pocket-friendly products
    • Introduction of Senco Gold Beans: India’s first tablet-sized gold beans, ideal for young investors

2. Industry Update

  • Gold Price Increase:
    • Global Price Rise: ~17% (April 2023 to March 2024)
    • Further Increase in Q1: ~9.5% (US$ 2340/Oz in June 2024)
    • Peak Price: US$ 2450/Oz (mid-May 2024)
    • YoY Average Price Increase in Q1: ~20%
    • QoQ Basis: 13% increase versus Q4
  • Drivers of Price Rise:
    • Global economic uncertainty
    • Israel-Hamas war
    • Weakening US dollar
    • Global dedollarization talks
    • Central bank buying (290 tonnes), led by China, Turkey, and India

3. Showroom Expansion

  • New Showrooms Added in Q1: 6 (4 owned, 2 franchisee)
  • Total Showrooms (as of 30th June 2024): 165
    • 4 in West Bengal, 1 in North, and 1 in Dubai

image
image1230×534 62.9 KB

4. Outlook FY 24-25

  • Focus on Wedding Buying:
    • Preparing for increased wedding-related purchases in Q2 and H2
    • Key festivals and events: Rath Yatra, Independence Day, Teej, Durga Puja, Navratri, Dhanteras/Diwali, and Weddings
  • Showroom Expansion:
    • Strong pipeline of new showrooms planned throughout the year
    • Growth expected in both owned and franchise channels
  • Growth Expectations:
    • Maintained a healthy CAGR of 21% over the last 5 years
    • Anticipate growth of 18% - 20% for the current year
13 Likes
71

image
When I try to buy some shares on Senco, I got this message. what does it mean ? can someone help me to understand pls

72
1 Like
73
1 Like
74
4 Likes
75

Senco Gold continues to sparkle with robust Q1 results, overcoming multiple challenges.

Key Points:

  • PAT Growth: Senco Gold’s PAT grew by an impressive 85% YoY, highlighting strong financial health.
  • Sales: Q1 sales growth faced challenges due to heat waves, general elections, fewer wedding dates, and a steep rise in gold prices compared to Q4 and revenue rose merely 7.5% YoY. Despite this, management remains confident in achieving their 18-20% growth target for FY25.
  • Store Expansion: Senco opened 6 new stores during the quarter, including its first international store in Dubai. The company plans to open 18-20 new stores this financial year, with 8-10 of these expected to be franchisee stores.
  • Same-Store Sales Growth: Same-store sales growth was subdued at 4% in Q1, but the company has set guidance for 8-10% growth for FY25.
  • Festival Sales: Akshaya Tritiya sales grew by 21% despite the broader challenges, showcasing Senco’s resilience.
  • Future Outlook: With wedding dates shifted to Q2 and the festive season starting in Q2, Senco expects a significant boost in sales in the latter half of the year, driven by occasions like Teej, Independence Day, Rakhi, Navratri, Dhanteras, Diwali, and the grand wedding season.
  • Industry Growth Drivers: The government’s reduction of import duty on gold from 15% to 6% is expected to be a major growth driver for the sector, accelerating the shift from unorganized to organized jewelers. This rate cut is narrowing the price gap between organized and unorganized players.
  • Market Share Gains: Organized jewelers like Kalyan have already seen increased footfall due to this development, providing a much-needed boost to consumer demand.
  • Stock Opportunity: The strong earnings growth has further reduced the PE of Senco’s stock, indicating a re-rating opportunity for investors.

Overall, solid plans for expansion and an optimistic outlook for the rest of FY25.

Disc. Holding. Views maybe biased. No recommendation to buy/sell

7 Likes