Titan saw strong demand in March quarter; rough waters ahead

Titan Co. Ltd continued the trend of double-digit growth across its businesses in the March quarter (Q4FY23). Excluding bullion and business-to-business (B2B) sales, revenue growth in the jewellery segment stood at 23% year-on-year (y-o-y). Jewellery makes up the largest share of Titan’s revenue.

This comes at a time when gold prices have risen substantially in 2023 so far. Of course, the quarter also benefited from a low base, considering Q4FY22 was impacted partly by the Omicron wave and muted consumer sentiments due to fragile geopolitical situation.

Graphic: Mint

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Graphic: Mint

On a three-year compound annual growth rate basis, the jewellery segment’s Q4 revenue rose 26%. The performance was led by growth in new and existing customer base, and higher ticket sizes. Also, last quarter saw a rebound in wedding sales. At the end of Q4, the count of jewellery stores stood at 541 led by addition of stores in Tanishq, Mia by Tanishq and Zoya during the quarter. Titan’s other segments–watches and wearables, and eyecare also saw healthy revenue growth and store additions. Overall, Titan’s standalone revenue rose by 25% y-o-y in Q4.

Now, how Titan’s margin fares in Q4 is worth tracking when the results are announced. Here, the increase in studded jewellery share would have a positive bearing. Recall that the company had disappointed on the margin front in Q3 with standalone Ebitda (earnings before interest, taxes, depreciation, and amortization) margin dropping by 247 basis points y-o-y. One basis point is 0.01%.

To be sure, the sharp rise in gold prices could hit demand. Titan noted softer demand in March after strong traction in January and February. Given this, it remains to be seen if the momentum at the entry level, which saw normalization in demand in Q4, sustains.

Analysts at ICICI Securities believe that in the medium term, the jewellery segment can outperform other consumer discretionary segments as it is relatively immune to a general slowdown in consumer discretionary spends. This is owing to favourable factors such as inelastic wedding purchases and gold used as an investment asset, they added.

Even so, as the base effect wanes, the trajectory of Titan’s revenue growth may moderate. Titan’s shares are about 7% lower than their 52-week highs of 2791 apiece seen in October. The Titan stock trades at nearly 59 times its FY24 estimated earnings, according to Bloomberg data. Pricey valuations could limit significant near-term upsides.


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