Despite the Covid-induced lockdown during the first half of this financial year, D P Abhushan (DPAL) surprised all positively on profitability front in H1FY21, led by sharp improvement in margins. However, revenue of the company de-grew by 37% YoY, largely due to Covid related lockdown which led shutdown of the stores. 

Company’s practice of averaging gold price, kept material cost lower leading to gross margin expansion of 565 bps YoY to 13.9% during H1FY21. Consequently, EBITDA margin expanded sharply by 451 bps YoY to 8.7%. Profit during H1FY21 grew strongly by 53% YoY to Rs 103 mn. 

Pandemic impacted topline performance

In the backdrop of Covid related lockdown, company’s store were almost shut in April and May month, while some recovery was seen from June month onwards with encouraging footfalls. DPAL’s net revenue declined by 37% YoY to Rs 2,137 mn as volume across products declined. Gold jewellery/Diamond jewellery volumes declined by 59%/39% respectively. With further addition of stores and ongoing festive season, sales of the company are expected to pick up in H2FY21. 

As per report generated by financial institutions, DPAL is in a sweet spot, as of now. H2FY21 will be better for the company, margin expansion continues and store addition will also continue, which provides headroom for growth. With ongoing festive season and wedding season ahead, demand for jewellery products is expected to increase with rise in footfall.