Buy Senco Gold; target of Rs 500: Emkay Global Financial

Emkay Global Financial' research report on Senco Gold

Encouragingly, Senco has also indicated improving franchisee interest, and targets a higher proportion of stores via the franchisee route (vs previous outlook of a ~50% franchisee-led expansion). Q4 performance was ahead of expectations, with a margin-led EBITDA and PAT beat of 30-40%. Retaining its growth outlook, Senco expects 18-20% growth to continue in FY26, along with a 30-40bps increase to the mid-point of the margin outlook vs adj EBITDA/PAT margin of 6.7%/3.2% in FY25. While we build in the top-end of the growth outlook, we stay conservative, with flat adj margin assumptions due to the recent volatility. With focus on attracting GenZ/millennial shoppers, Senco has signed a master-franchisee agreement with light-weight and omni-channel jewelry brand Melorra. Senco has not quantified the planned investments in the new venture, as of now.

Outlook

We maintain BUY on Senco with an unchanged TP of Rs500 (25x Jun-27E EPS), as a 4-5% cut in estimates on higher interest expense is completely offset by rollover to Jun-26E TP. With elevated gold prices, there is a cash crunch on the balance sheet currently; however, D/E levels are comfortable and below historical levels at 0.9x (vs 1.1x YoY); this provides ample room for raising growth capital via debt, in our view.