Senco Gold shares crash up to 19% on Dhanteras day; what's weighing on sentiment?

The stock of Senco Gold tumbled as much as 19% to hit a low of ₹981.30 against the previous close of ₹1,213 on the BSE. However, it recovered later, and at the time of writing this report, the stock was down over 8% at ₹1,112.80.

On a year-to-date (YTD) basis, the stock has surged over 56%. 

As per market observers and traders, the reason behind the sharp drop in the share price of Senco Gold is elevated gold prices. 

Gold prices, as per analysts, are too high, affecting consumer demand. Further, companies are lowering jewelry-making charges, which will lower their profitability, they note. 

Besides, changing customer preferences, too, are said to be impacting the overall sentiment. There are traders arguing that Generation Z is more inclined towards buying iPhones and other high-tech gadgets instead of gold.

It must be noted here that the company, in its Q1 FY25 results announcement, had said that the customs duty reduction from 15% to 6% will impact inventory valuation and affect the gross margin and EBITDA over the next two to three quarters.

Other jewellery stocks, too, were trading in the red. For instance, Titan Company shares were down 1% at ₹3,254.55 apiece on the BSE. PN Gadgil Jewellers was down over 3% at ₹701. Kalyan Jewellers stock was down 2% at ₹656.15. 

In its Q2 update, Senco Gold reported retail growth of 27% year-on-year (Y-o-Y) for Q2FY25 and 19% for H1 Y-o-Y.

Further, Senco Gold's stud ratio substantially improved to 11.1% in Q2 as against 9.9% in Q1. The H1 stud ratio grew 10.5%.

Stud ratio describes the proportion of jewellery with studded stones compared to plain gold jewelry.

In the quarter ended September 30, 2024, the company launched 15,700 new gold jewellery designs and 7,400 diamond jewellery designs in H1FY25.

The company added that it will launch 18-20 jewelry showrooms, including 10-12 franchisees, in H2 2025, out of which 8 showrooms were already launched in H1. 

Senco Gold Q1 FY25 Results

Senco Gold Ltd reported a net profit of ₹51.27 crore for the first quarter of the current fiscal (April-June 2024), marking an 85.4% increase on the back of higher revenue.

The Kolkata-based gold and diamond jewellery chain saw a 7.5% year-on-year growth in consolidated revenue, reaching ₹1,403.89 crore for the quarter ended June 30.

The company's EBITDA surged by 61.8% to ₹108.74 crore during the quarter, the company informed bourses.

Senco Gold MD and CEO Suvankar Sen said, "To enhance domestic value addition in gold and precious metal jewellery, the government of India has reduced customs duties on gold and silver to 6% and on platinum to 6.4% from the earlier 15%."

Company CFO Sanjay Banka had said that the customs duty reduction from 15% to 6% will impact inventory valuation and affect the gross margin and EBITDA over the next two to three quarters.