D.P. Abhushan

D.P. Abhushan reported a remarkable Q2 FY25, with total revenue surging 84% YoY to ₹1,005 crores and PAT growing 89% YoY to ₹25 crores. Management attributed this exceptional growth to a combination of factors, including a government reduction in import duties that spurred consumer excitement, and a significant shift of demand from a slower Q1, which was impacted by the nationwide elections. The strong performance was broad-based, with the flagship Ratlam store alone clocking ₹486 crores in H1, a 56% YoY increase.

A key point of discussion was the QoQ EBITDA performance, which remained flat at ₹38 crores despite revenue doubling. This led to a margin contraction from 7.6% in Q1 to 3.8% in Q2. Management directly addressed this, explaining that Q1's margin was exceptionally high due to a 1-1.5% benefit from gold price appreciation. They clarified that Q2 reflects a more normalized margin profile and provided clear full-year guidance for an EBITDA margin between 5.5% and 7% and a PAT margin of 3% to 5%.

The company outlined an aggressive yet focused expansion plan, aiming to more than double its store count from 8 to 20 by FY28. The strategy is centered on penetrating high-potential Tier 2 and Tier 3 cities in Madhya Pradesh, Rajasthan, Chhattisgarh, and Gujarat. For FY25, the company plans to open three new stores, with one already operational in Ajmer. Each new store requires a capex of ₹2.5-3 crores and an inventory investment of ₹35-40 crores.

To enhance profitability, management is actively working to change its product mix. The company aims to increase the revenue contribution from diamond-studded jewellery from the current 6-7% to 12% over the next three years. A key initiative to drive this is the 'shop-in-shop' model for wedding customers, offering a premium experience and a wider range of high-value diamond sets, which command higher making charges.

Despite the ambitious expansion plans, the company maintains a conservative financial strategy. Management stated that the company generates approximately ₹100 crores in free cash flow annually, which is sufficient to fund the opening of 3-4 new stores per year primarily through internal accruals. They prefer this self-funded model over leveraging debt, and only plan to use Gold Metal Loans (GML) opportunistically for 10-20% of their inventory in the future if required for accelerated expansion.

Management expressed strong confidence in the ongoing festive and wedding season. They reported that the company has consistently set new sales records during auspicious days like Pushya Nakshatra and Dhanteras. This optimism is supported by strong Q2 volume growth, where gold sales reached 1,335 kg, a 36% increase year-over-year, indicating robust underlying consumer demand heading into the peak season.