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D.P. Abhushan Ltd

| Q2 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤6th Nov 25

Summary : DP Abhushan reported mixed Q2 FY26 results with strong profit growth despite revenue softness, driven by festive demand and strategic expansion plans.

Management Perspective positive : We are confident that the degrowth in the last two quarters will compensate for it. We anticipate strong performance in the upcoming two quarters. We remain confident in achieving 20-25% year-on-year growth.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 revenue from operations was ₹967.65 crore, up 79% QoQ but down 4% YoY due to gold price volatility.
  2. EBITDA increased 99% YoY to ₹75.80 crore, with margins improving to 7.83%.
  3. Profit after tax (PAT) was ₹51.46 crore, up 105% YoY, with a 5.32% PAT margin.
  4. H1 FY26 revenue was ₹1,508 crore, flat YoY, but EBITDA and PAT grew 72% and 75% respectively.
  5. Gold contributed 91% of revenue, silver grew 103% YoY, while diamonds declined 3%.

Future Growth Prospects

  1. Strategic expansion planned across Central India, including Gujarat, Chhattisgarh, Madhya Pradesh, and Rajasthan.
  2. New stores will follow the Company-Owned Company-Operated (COCO) model.
  3. QIP process is underway to fund store expansion and enhance product offerings.
  4. E-commerce platform is in trial phase, expected to go live before FY26 end.
  5. FOCO model pilot project expected to launch soon, with franchise operations commencing next financial year.

Management Insights

  1. Gold price volatility led to a sharp decline in jewelry demand volumes, though value grew due to higher ticket sizes.
  2. Festive season demand, particularly Navratri and Dussehra, provided a strong boost in September.
  3. Diamond-studded and silver jewelry are emerging as key growth drivers, appealing to younger consumers.
  4. Targeting 20-25% year-on-year revenue growth and 7-8% EBITDA margin for FY26.
  5. Confident that strong performance in upcoming quarters will compensate for earlier degrowth.

Signs of Skepticism

  1. Despite significant volume degrowth (20-30% in H1/Q2), management expresses high confidence in full-year revenue targets.
  2. Heavy reliance on upcoming wedding and festive seasons (Q3/Q4) to offset previous quarter's softness.
  3. The impact of sustained high gold prices on consumer behavior remains a concern for volume recovery.

Risk Factors

  1. Elevated gold prices led to consumer budget constraints and delayed purchases, impacting Q2 revenue.
  2. Significant volume degrowth observed: 15% in Q1 and 30% in Q2.
  3. Increased competition in key markets like Indore from larger players.
  4. Reliance on festive seasons to compensate for earlier softness in demand.

Good To Know

  1. 62,300 Employee Stock Options (ESOPs) granted under the 2024 plan to motivate team members.
  2. Inventory valuation uses the weighted average method; no traditional hedging, but natural hedging is practiced.
  3. Company's book value of gold is significantly lower than current market price, mitigating price fall risks.
  4. Promoter holding remains high at around 75%, reflecting strong confidence in the business.
  5. New stores will be opened using gold metal loans and proper inventory hedging.

Key Drivers

  1. Strong festive season demand.
  2. New store expansion plans.
  3. E-commerce platform launch.
  4. Diversifying product offerings.

Key Analyst Discussions

Competitive Environment

  1. Increased competition from larger companies in markets like Indore.
  2. Company maintains leadership through designs, curated collections, and customer service.
  3. Presence of more brands helps attract a wider customer base, creating larger market opportunities.

Market Trends & Consumer Behavior

  1. High gold prices led consumers to delay purchases, awaiting price correction.
  2. Shift in consumer preference towards lighter-weight, 18-carat gold and diamond jewelry.
  3. Festive occasions like Navratri and Dussehra drove strong demand for daily wear and wedding jewelry.
  4. Younger urban population views jewelry as a lifestyle accessory, boosting demand for contemporary designs.

Financial Highlights

  1. Average ticket price increased due to gold price hike, with interest in lower carat gold.
  2. Volume degrowth was approximately 20% for H1 and 30% for Q2 FY26.
  3. October sales showed strong growth of 30-40% year-over-year.
  4. Normalized gross margin is typically 8% to 9%.
  5. Q2 EBITDA margin improved significantly to 7.83% from 3.79% YoY.

Product Composition

  1. Growing interest in 18-carat gold and 14-carat diamonds.
  2. 22-carat gold remains the leading category with consistent demand.
  3. Company introduced new designs and launched 'Amora' brand for 18-carat segment.
  4. Focus on high-making charge jewelry, studded diamond, and silver offerings to drive margins.

Strategic Considerations

  1. QIP is under process and expected to conclude soon, with proceeds for store expansion.
  2. Planning to open 2-3 new COCO stores this financial year, 8-10 over the next 2-3 years.
  3. FOCO model is under finalization, with a pilot project expected to launch soon.
  4. E-commerce platform is being developed and will go live by end of FY26.
  5. Promoter stake dilution is possible with QIP, but will be strategic and aligned with growth plans.
D.P. Abhushan Ltd (DPABHUSHAN) Concall Report Analysis & Insights | Dhanarthi