Target: ₹920
CMP: ₹745.15
Senco Gold Ltd is a pan-India jewellery retail player with a history of more than five decades.
We believe great growth prospects lie ahead for Senco Gold in the Indian retail jewellery market due to its strong legacy of over 5 decades, focus on lightweight, modern and affordable jewellery segment, robust business model with right mix of CO/Franchise model and rising stud ratio aiding healthy overall margins and return ratios, diverse distribution channel with growing presence across regions, poper hedging practices to avoid the impact of gold price volatility, positive industry outlook favoring growth of organised players.
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We expect Senco to grow at Revenue/EBITDA/PAT CAGR of 24.8/21.8/21.6 per cent respectively over FY23-FY26E. At current price, Senco Gold is trading at PE multiple of 34.4x/25.9x/19.7x of its FY24E/FY25E/FY26E earnings respectively.
We have valued the company at 35.9x PE multiple based on its FY25E earnings and arrive at a target price of ₹920.
Key Risks: Intense competition; volatility in gold prices may dampen jewellery demand; high working capital requirement; and dependence on skilled designers/Karigars