D.P. Abhushan

D.P. Abhushan reported its highest-ever profitability in Q3 FY25, driven by strong festive and wedding season demand. Total revenue surged by 42% YoY to ₹1,085 crores. This top-line growth translated into even stronger bottom-line performance, with EBITDA growing 92% YoY to ₹56 crores and PAT increasing by an exceptional 123% YoY to ₹37 crores. The EBITDA margin expanded significantly by 135 basis points to 5.14%, underscoring operational leverage and a favorable product mix.

A key driver of the quarter's outstanding performance was a significant improvement in gross margins. Management highlighted that gross profit grew 72% YoY, far outpacing the 42% revenue growth. This was attributed to a strategic focus on higher-margin categories like wedding and diamond jewellery. The revenue mix comprised 93% from gold and 5% from diamonds. The company also noted a growing consumer trend towards 18-carat, rose gold, and white gold jewellery, which now contributes 10-15% to revenue.

The company unveiled an aggressive expansion plan, intending to raise up to ₹600 crores through a Qualified Institutional Placement (QIP). These funds are earmarked to double the current store network over the next 2-3 years by adding 10 new company-owned stores. The expansion will target key regions beyond their strongholds of Madhya Pradesh and Rajasthan, including Gujarat, Chhattisgarh, and parts of Uttar Pradesh and Bihar. Additionally, the company plans to pilot a franchise model, aiming to open 2-3 franchise stores within the next two years.

During Q3, the company launched a new 7,700 sq. ft. showroom in Neemuch, Madhya Pradesh, which, along with the previously opened Ajmer store, is reportedly receiving a positive customer response. Construction is also well underway for a second, large-format showroom in Ratlam with a 12,000 sq. ft. carpet area, slated to open by the end of FY25. Existing stores also demonstrated strong performance, with 9M FY25 YoY growth figures of 76% for Bhopal, 54% for Banswara, and 51% for Ujjain.

In the Q&A session, management clarified its inventory accounting policy, which uses the weighted average cost method. This results in an inventory book value that is currently 8-10% lower than the market price of gold (e.g., book value of ₹73-74k vs. market price of ₹88k). While this practice boosts reported gross margins compared to peers, it also highlights a risk. Management stated they are 'naturally hedged' due to this price buffer and will only implement formal hedging (like Gold Metal Loans or futures) when their book value aligns more closely with the market price.