Buy Senco Gold; target of Rs 1600: Emkay Global Financial

Emkay Global Financial's research report on Senco Gold

We see significant re-rating scope for Senco, helped by our expectations of a strong pick-up/SSG outperformance in Q2 and valuation discount vs P N Gadgil (PNG) after its ~70% listing gain. Our checks suggest a strong pick-up in jewelry retail after a modest Q1, as intermediate cooling of gold prices rushed consumers to stores. In our view, Senco is now comfortably placed to meet or exceed its 18-20% annual growth guidance, despite only 11% growth in Q1. On a trailing basis (FY24 PAT), Senco is trading at a 45-55% discount to Titan/Kalyan and at ~25% discount to P N Gadgil. Given the strong execution in FY24/H1FY25E and relatively longer listing history, we believe the steep discount is unwarranted.

Outlook

Given the improved medium-term growth profile with a big 900bps duty cut and outperformance vs other retail formats, we are increasing our multiple by 15% to 36x EPS, and reiterate our BUY rating with a revised Sep-25E TP of Rs1,600/sh. Volatility in gross margin is a key downside.

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