Emkay Research maintains its BUY recommendation on Senco Gold, setting a 12-month target price of Rs500, representing a potential upside of 31% from current levels. The report highlights robust Q4 performance, resilient margins despite volatile gold prices, and a confident outlook for FY26, underpinned by asset-light expansion and strategic partnerships. Investors are advised to consider the following analysis and actionable levels for the stock.

Strong Execution and Resilient Margins Drive BUY Call

Emkay Research has reiterated its BUY rating on Senco Gold (CMP: Rs381, Target: Rs500), citing impressive Q4 execution and a positive outlook for FY26. The company delivered a 21% year-on-year revenue growth in Q4, with EBITDA and PAT beating estimates by 30–40%. Despite elevated gold prices and a temporary cash crunch, Senco’s debt-to-equity ratio remains comfortable at 0.9x, providing ample room for growth capital. The retailer’s expansion strategy is increasingly franchisee-led, with a focus on pan-India growth and attracting younger consumers through innovative partnerships and store formats. Emkay expects 18–20% revenue growth and a moderate margin expansion in FY26, making Senco a compelling pick in the organized jewelry sector.

Q4 Performance: Margins Surpass Expectations

Senco Gold’s Q4 results were marked by a 21% year-on-year increase in consolidated revenue to Rs13.8 billion. This was driven by a 20% rise in gold jewelry sales and a robust 38% jump in diamond jewelry sales. Although gold volumes declined due to elevated prices, diamond volumes grew, partially offsetting the pressure. EBITDA margin expanded to 9.2% from 7.7% a year earlier, with PAT more than doubling to Rs624 million. The company’s ability to maintain gross margins at 17.1% despite a 30% YoY gold price increase reflects strong product mix and operating leverage. Inventory days rose to 190 due to pre-Akshaya Tritiya stocking and gold price hedging.

FY26 Outlook: Asset-Light Expansion and Margin Recovery

Management expects to sustain 18–20% revenue growth in FY26, supported by the addition of 18–20 new stores, with a greater emphasis on franchisee-led expansion. The franchisee mix is expected to rise to over 35%. EBITDA margin guidance stands at 6.8–7.2%, up from 6.7% in FY25, reflecting a focus on studded jewelry and cost optimization. Senco has also signed a master-franchise agreement with Melorra, targeting GenZ and millennial consumers with lightweight, fashionable jewelry. Planned investments in the new venture will be communicated post due diligence.

Strategic Catalysts: Pan-India Ambitions and Category Innovation

Senco is expanding beyond its Eastern stronghold, with non-East region revenue growing 23% in FY25. The company is rolling out specialized store formats like Everlite, which cater to urban professionals with a strong diamond mix (50–60%) and price points of Rs20,000–50,000. Old gold exchange now accounts for 40% of sales, with 60% of these transactions coming from non-Senco customers, indicating a shift from unorganized to organized players. The company aims to increase its studded jewelry mix to 15% by FY27, from 10.9% in FY25.

Valuation: Attractive Discount to Peers

At 25x FY27E EPS, Senco trades at a significant discount to Titan’s 46x, despite similar growth trajectories. Emkay’s Rs500 target implies a 17% EPS CAGR over FY25–28, compared to the sector average of 12%. The stock’s PEG ratio stands at 1.2x, versus 1.8x for Kalyan Jewellers. By FY28E, Senco is expected to generate a 7.3% FCF yield and reduce its debt-to-equity ratio to 0.7x.

Financial Snapshot and Key Metrics

Risk Factors: Gold Prices and Interest Rates

While Senco managed FY25’s average gold loan rates of 6.6% effectively, investors should watch for further volatility in gold prices and interest rates. A 200-basis-point spike in GML rates could erode FY26E PAT by 9%. Stagnation in the diamond mix or execution challenges in franchisee expansion could also cap margin upside. The company’s ability to maintain brand equity while expanding through franchisees in new markets will be critical.

Investment Strategy: Levels and Target

Investors are advised to consider accumulating Senco Gold on dips below Rs400. Near-term support levels are seen at Rs360 (200-day moving average) and Rs325 (FY24 book value). Key upside triggers include scalability of the Melorra partnership, margin outperformance in H1FY26, and potential RBI rate cuts. Allocating 2–3% of a portfolio to Senco offers exposure to India’s $80 billion jewelry market, with strong growth potential in the organized sector.

Conclusion: A Compelling Growth Story

Senco Gold’s robust execution, resilient margins, and asset-light expansion strategy position it as a standout in the Indian jewelry sector. The company’s focus on innovation, customer diversification, and pan-India growth, combined with an attractive valuation gap, makes it a compelling investment for the medium term. Emkay’s BUY call and Rs500 target reflect confidence in Senco’s ability to deliver consistent growth and shareholder value.