Analyst Concall
Titan cuts FY25 jewellery EBIT margin guidance to 11-11.5%
This story was originally published at 20:28 IST on 5 November 2024
Register to read our real-time news.Informist, Tuesday, Nov. 5, 2024
Please click here to read all liners published on this story
--Titan Co: See INR 2.8 bln hit in Oct-Dec due to gold customs duty cut
--Titan Co: See jewellery business consol margin for FY25 at 11-11.5%
--Titan Co: See next two quarters being good for wedding jewellery segment
--Titan Co: Wedding jewellery demand picked up after customs duty cut
--Titan Co: Consumer sentiment in Jul-Sept was good
--Titan Co: Except solitaire, Jul-Sept growth in studded jewellery healthy
--Titan Co: Jul-Sept margin hit by lower-than-expected studded jewellery mix
--CONTEXT: Titan Co management's comments at post-earnings analyst concall
--Titan Co: Jul-Sept margin was substantially impacted by customs duty cut
By Anand J.C.
MUMBAI – Titan Co. Ltd. has cut the operating profit margin guidance for its jewellery business for the financial year 2024-25 (Apr-Mar) to 11.0-11.5% on a consolidated basis from 11.5-12.5% previously, the management said during a post-earnings analyst call Tuesday. The cut in margin outlook is largely due to a one-time impact from a gold customs duty cut in the September quarter, the company said.
Following the customs duty cut, the company incurred a one-time impact of INR 2.90 billion in Jul-Sept due to lower customer realisations, the company said in an investor presentation. It expects an impact of INR 2.75-2.80 billion due to the same duty-related inventory hit in Oct-Dec. In August, the management had guided for a maximum loss of INR 5.0-5.5 billion over six months.
The jewellery segment’s operating margin in Jul-Sept was 8.3%, and 9.2% in Apr-Sept, on a consolidated basis. Titan Co. expects better performance in the remaining six months of FY25 on the back of realisation of the company's initiatives and the stabilisation of gold and diamond margins.
DEMAND SCENARIO
Titan’s management said sentiment during the festive season was ‘excellent’. Demand for wedding jewellery picked up after the customs duty reduction announcement in July as customers were awaiting a correction in gold prices, the company said. The management expects a good run for the segment in the next two quarters.
In the solitaire business, the demand for large carat stones was under pressure in the reporting quarter due to price uncertainties on account of international demand-supply imbalances, the company said. The management expressed satisfaction with buyer growth in the studded jewellery segment in the September quarter, as more customers are now in the market seeking this product. Demand in the non-solitaire segment remains good and healthy, the management said.
Affordable jewellery brand CaratLane’s earnings before interest and taxes margin increased 289 basis points on year in the September quarter to 7%. The management attributed this rise to a significant rise in sales growth for the brand, and to cost management. It expects CaratLane’s margin to be better in the coming quarters.
Titan Co. added 30 Tanishq stores in FY25 up to Sept. 30 and aims to add another 40-50 stores in FY25, the management said. The store count of the Mia brand is expected to increase to 250 by the end of FY25. While CaratLane currently has 301 stores, the company has already added 29 stores this financial year so far and is looking to add 20 more.
WATCHES BUSINESS
The watches and wearables business of Titan Co. reported a revenue of INR 12.76 billion for the September quarter, up 18.7% on year. The Titan brand grew 32% on year in the analogue segment, aided by strong volume growth, indicating continued consumer preference for premium brands. The company's management attributed the growth of the analogue watch segment in the previous few quarters to strong product design, innovation, and premiumisation. Watches priced over INR 5,000 did well for the company, with the Titan brand spearheading growth in this segment, the management said.
While wearables grew in double digits in Jul-Sept, the average selling prices continued to decline. The wearables side of the business is witnessing some correction, having grown over the past two years. The share of analogue watches was higher in the September quarter, the management said.
COMPETITIVE PRESSURE
The fall in the EBIT margin of the jewellery business in the September quarter had more to do with the studded product mix rather than competitive pressures, the management said. Gold prices crept up in Jul-Sept, which spurred competitive intensity in the period.
Local players offered discounts to offset higher gold prices. Titan Co., through Tanishq, opted to give offers through making charges and other discounts, the management said. During the festival season, people found exchange offers more attractive, the company said. In the studded jewellery segment, the management noted that its competitors are providing better pricing.
Titan Co. announced its earnings report after market hours Tuesday. Shares of the company closed slightly higher at INR 3,230.25 on the National Stock Exchange. End
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
