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Informist, Friday, Aug 2, 2024

--Titan: Apr-Jun demand affected due to steep rally in gold rates 

--Titan: Apr-Jun demand affected due to election-led restrictions 

--Titan: Apr-Jun demand affected due to very few wedding dates

--Titan: Gold custom duty cut may lead to value loss on inventory 

--Titan: Value loss on gold inventory seen expensed over next 2 qtrs 

--Titan: Gold custom duty cut positive for jewellery industry 

--Titan: Saw new store growth of 3% on year in Apr-Jun 

--Titan: Believe we have held on to overall market share 

--Titan: Have not lost or gained market share 

--Titan: Gold duty cut will reduce attractiveness of illegal imports 

--Titan: New buyer contribution, excluding CaratLane, 45% in Apr-Jun 

--Titan: Expect gold duty cut to cause 5-5.5-bln-rupee loss over 6 mos

By Anshul Choudhary

MUMBAI – Cost-control measures helped Titan Co Ltd limit the fall in net profit for the June quarter to 1% from a year ago. The net profit fell due to a hit to demand on account of high gold prices, disruptions on account of general elections, fewer wedding days, and extreme heatwaves, but it was still above the Street's estimates.

The company's net profit came in at 7.70 bln rupees, while an average of estimates from six brokerages had pegged the metric at 7.50 bln rupees. The company managed to perform better than expectations as operating margin of the jewellery business--the largest business--rose slightly, while several brokerages had expected a fall. The company's overall standalone earnings before interest and taxes margin was down marginally by 2 basis points to 10.7% in Apr-Jun.

EBIT margin of the jewellery business was 11.2%, higher than 11% a year ago. The segment's sales rose 9% on year to 98.79 bln rupees. The segment saw muted consumer demand for the high-margin solitaires segment, the company said. The overall sales growth in the studded jewellery segment was 6% on year.

"Q1 (Apr-Jun) saw multiple forces coming together that impacted topline; a steep rally in gold rates (20% YoY), election led restrictions in many markets, very few wedding dates (5% growth in wedding sales YoY) and an unprecedented heat wave across the country," the company said in a post-earnings presentation.

Titan's revenue for the quarter rose in line with analysts' expectations and the company's quarterly update in July. Its revenue from operations rose 8% on year to 120.53 bln rupees. Analysts saw the topline at 121.81 bln rupees.

Despite muted earnings for the quarter, the company neither gained market share nor lost market share, the management said in a post-earnings conference call.

The company saw new store growth of 3% on year during the quarter, while the contribution from new buyers, excluding CaratLane, was 45%. Tanishq brand net added 11 new stores in India, and added 19 stores for Mia, and three stores for Zoya. Its CaratLane business added three stores during the quarter, taking its total store count to 275.

GOLD CUSTOM DUTY

The management expects a maximum loss of 5.0-5.5 bln rupees due to the government's cut in custom duty on gold. This cost is likely to be incurred over the next six months, the company said. In the Budget in July, the government cut the custom duty on gold to 6% from 15% leading to a fall in gold prices, which in turn is expected to lead to value loss on gold inventory for Titan.

Titan considers this impact on inventory to be short-term and said the move is positive for the jewellery industry in the long run. The duty cut on gold will bring down the attractiveness of illegal imports, the management said during the call.

OTHER SEGMENTS

Among its smaller segments, sales from the watches and wearables segment rose 14.7% on year to 10.21 bln rupees during Apr-Jun. The segment's EBIT margin declined 20 basis points on year to 11.3%. Sales in the segment was led by Fastrack and Titan products growing 25% and 16% on year, respectively. The growth in this segment was largely led by watches. Its wearables products continued to witness decline in the average selling prices leading to a 6% drop in revenue.

Sales from the eyecare business improved 3% from a year ago to 2.1 bln rupees. The EBIT margin of the vertical was 9.6%, sharply lower than 17.2% a year ago. Volumes in the segment grew 10% on the back 8% growth in buyers. However, a 4% on-year fall in average selling price, along with 24% rise in advertising spends, likely affected the margin.

Today, shares of Titan Co closed almost flat at 3,462.35 rupees on the National Stock Exchange.  End

Edited by Ashish Shirke

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