A 50% revenue surge and 400% profit jump have made analysts sit up and take notice
When a mid-cap jewellery stock delivers revenue growth of 50% and profit growth north of 400% in a single quarter, you’d expect analysts to be tripping over themselves. Senco Gold’s Q3FY26 results has driven BOB Capital Markets which has upgraded to buy with a raised target, while Motilal Oswal maintains a cautious neutral stance.
Are we witnessing a jeweller hitting its stride in a structurally favourable gold market, or a company benefiting from one-time inventory gains that will reverse as competitive pressures mount?
The Quarter That Shone
Senco’s Q3 numbers demand attention. Consolidated revenue surged 51% year-on-year to Rs 3,070 crore, a dramatic acceleration from the anaemic 2% growth posted in Q2 — a quarter where peers like Titan, Kalyan, and P N Gadgil were comfortably delivering 20%-plus growth.
Same-store sales growth hit 39%, supported by festive demand and a higher old-gold exchange mix that reached 43% of revenue. Average transaction value rose 8% sequentially to Rs 93,000, while average selling price climbed 6% to Rs 60,270.
But the real story was margins. Gross margin expanded a stunning 830 basis points year-on-year to 19.9%, demolishing Motilal Oswal’s estimate of 14.3%. EBITDA margin hit 13.4%, up 810 basis points from the prior year and 640 basis points sequentially.
“EBITDA grew 282% YoY to Rs 4.1 billion against estimates of Rs 1.6 billion,” Motilal Oswal notes. “APAT grew 396% to Rs 2,687 million against estimates of Rs 796 million.”
BOB Capital Markets frames the outperformance saying: “EBITDA increased 406% YoY with a 100% beat to estimates, while APAT grew 688% YoY to Rs 2.6 billion, a 130% beat. Sequentially, revenue and EBITDA nearly doubled from Q2FY26 levels, underscoring sharp improvement in execution and demand traction.”
The Inventory Gain Question
A significant portion of Senco’s margin expansion came from inventory gains — paper profits generated when a jeweller holds unhedged gold inventory during a price rally. Gold prices surged 63% year-on-year during the quarter, and Senco’s hedging ratio has dropped significantly.
“Inventory gains added approximately 350 basis points in Q3 and approximately 250 basis points in 9MFY26 gross margins, which led to a sharp beat to our estimates,” Motilal Oswal observes. “Senco has lowered inventory hedging to 55-60% in 9MFY26 versus the earlier 95% in FY25.”
Strip out the inventory gains, and the picture changes. “EBITDA margin adjusted for inventory gain stood at approximately 9.5-10% in Q3 and approximately 8.5% in 9M,” the brokerage calculates. Management has guided for sustainable EBITDA margins of 7.5-7.8% — a far cry from the reported 13.4%.
Motilal Oswal’s says: “Given the inconsistencies in operating performance and low hedging ratios, we remain cautious on Senco’s operating margin performance going ahead. We model 7.2% margin for FY27/FY28, close to the average of FY23-25.”
Structural Improvements
BOB Capital Markets has emphasized structural improvements that extend beyond inventory timing, particular in store sales. “Performance was supported by 31% same-store sales growth in owned stores and favourable channel mix, with own stores contributing 65% of revenue, franchise 33%, and others 2%,” BOB Capital notes. “Margin gains reflect structurally higher profitability in owned stores at 18-20% gross margin versus 7-8% for franchise.”
This channel mix shift matters. As Senco tilts toward company-owned stores, its baseline profitability improves regardless of gold price movements. The stud ratio — the proportion of diamond-studded jewellery in sales — has remained stable at around 11%, while lightweight and diamond categories posted 38% value growth.
The Melorra acquisition adds another dimension. “The Melorra acquisition is intended to deepen presence in younger customer cohorts,” BOB Capital observes, pointing to optionality that doesn’t feature in near-term estimates.
Management’s guidance reinforces the bullish case. Q4FY26 revenue growth is expected at 25-30% year-on-year, with FY27 growth projected above 20%. The company plans 18-20 store additions and expects borrowing costs to decline 30-40 basis points following a rating upgrade.
Measured Store Expansion
Senco opened four stores during the quarter, a 15% year-on-year increase that brought total count to 196 — comprising 111 company-owned, 83 franchise, and 2 Dubai locations. The company remains on track to reach 200 stores by FY26-end.
BOB Capital Markets describes this as a “calibrated expansion strategy,” suggesting management is prioritizing quality over quantity. The shift toward owned stores, while capital-intensive, supports the margin improvement thesis.
The Gold Price Card
But gold prices have reached record highs of Rs 1.4-1.5 lakh per 10 grams. This creates a double-edged dynamic.
On one hand, elevated prices drive up transaction values and benefit unhedged inventory positions. BOB Capital notes that demand has remained “resilient despite record-high gold prices,” supported by higher old-gold exchange contributing 45-50% of sales.
On the other hand, Motilal Oswal points out that gold volumes have declined — down 3% quarter-on-quarter and approximately 10% in 9MFY26. Consumers are buying fewer grams even as they spend more rupees. If gold prices correct, the inventory gains that boosted Q3 margins could reverse into losses.
Senco’s reduced hedging ratio amplifies this risk. At 55-60% hedged versus 95% previously, the company is making a directional bet on gold prices.
The Target
BOB Capital Markets sees enough improvement in execution, channel mix, and demand visibility to upgrade to buy with a target of Rs 411. Motilal Oswal, weighing the same evidence, maintains neutral at Rs 375.
