BackSenco Gold share price jumps over 8%; Emkay Global sees 24% more upside
Senco Gold boasts of being one of the top-2 as regards revenue share in the ₹800 billion eastern market, abetted by strongest brand accessibility versus peers, in terms of product, price and penetration.
PremiumSenco Gold share price jumped as much as 8.44% to a high of ₹509.25 apiece on the BSE Thursday. Since listing in July, Seco Gold shares have rallied more than 18%.
Senco Gold shares made a strong debut on the Indian stock market exchanges on July 14 as the stock was listed with more than 35% premium at ₹431 on BSE.
Analysts believe Senco Gold shares are still trading at a steep discount to its peers and have a scope for further upside.
Emkay Global Financial Services initiated coverage on Senco Gold with a ‘Buy’ rating and a target price of ₹630 per share, implying an upside of around 24% from Thursday’s high price.
Senco Gold boasts of being one of the top-2 as regards revenue share in the ₹800 billion eastern market, abetted by strongest brand accessibility versus peers, in terms of product, price and penetration.
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“Growth headroom is huge, as its market share is still at a mid-single-digit in the East, and focused efforts are afoot to capitalize on non-East prospects. Better access to capital, upbeat franchisee interest and shift to organized should drive a strong revenue-led EPS CAGR of >20% for Senco in FY23-26E," Emkay Global said in a report.
It believes growth would be backed by near-equal input from new stores and SSG. Senco follows hygiene practices for sourcing/hedging gold (50% stated policy), thus reducing the commodity’s volatility risk.
While Senco logs 13-14% RoE in COCO (company-owned company-operated) stores, returns in FOFO (franchisee-owned franchisee-operated) stores are much higher, on nil inventory investment.
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Compared to peers, Senco’s return is aligned with Kalyan’s or better than most listed jewelry retailers’. Senco’s margin surpasses peers’, albeit revenue per store is lesser, on low per-capita in the East; but this gets adjusted, on lower inventory needed at stores, Emkay Global analysts Devanshu Bansal and Bhavika Choudhary said.
On valuations front, the analysts believe that the stock trades at a big gap with peers and is a candidate for huge rerating on certainty of earnings delivery. They said Senco Gold’s 19x 1-year forward P/E is at a major discount to peer valuations, offering scope for rerating.
“We expect Senco to clock ~20% PAT CAGR over FY23-26E which is in line with some best-performing sector players. Despite similar growth prospects, Senco trades at ~40% discount to Kalyan Jewelers. While Kalyan has relatively better brand strength for faster Pan-India expansion, we believe such a steep discount is unwarranted and provides scope for re-rating, as Senco delivers on our expectations going ahead," Emkay Global said.
At 2:20 pm, Senco Gold shares were trading 5.85% higher at ₹497.05 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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