Titan Company Limited continued the trend of double digit growth across its businesses in the March quarter (Q4FY23). Excluding bullion and business-to-business (B2B) sales, the revenue growth in the jewelery segment stood at 23% year-on-year (YoY). Jewelery accounts for the largest share of Titan’s revenue.
This comes at a time when gold prices have gained a lot in 2023 so far. To be sure, the quarter also benefited from a low base, given that Q4FY22 was partially impacted by the Omicron wave and subdued consumer sentiments due to the fragile geopolitical situation.
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On a three-year compound annual growth rate basis, the Q4 revenue of the jewelry segment grew 26%. The performance was led by growth in new and existing customer base and higher ticket sizes. Also, the last quarter saw an uptick in wedding sales. At the end of Q4, the number of jewelery stores stood at 541, led by Tanishq, Mia in Tanishq and Zoya adding stores during the quarter. Titan’s other segments – watches and wearables, and iCare also saw healthy revenue growth and store growth. Overall, Titan’s standalone revenue grew 25% year-over-year in Q4.
Now, how much are Titan’s margins worth tracking in Q4 when the results are announced. Here, an increase in the share of studded jewelery will have a positive impact. Recall that the company disappointed on the margin front with a 247 basis points decline in standalone EBITDA (earnings before interest, tax, depreciation and amortization) margin in the third quarter. One basis point is 0.01%.
Certainly, a sharp rise in gold prices can impact the demand. Titan registered soft demand in March after strong traction in January and February. Given this, it remains to be seen if the momentum is sustained on the entry level, which saw a normalization in demand in the fourth quarter.
Analysts at ICICI Securities believe that in the medium term, the jewelery segment could outperform other consumer discretionary sectors as it is relatively immune to the general slowdown in consumer discretionary spending. He said this is due to favorable factors such as wedding shopping and gold being used as an investment asset.
Still, as the base effect wanes, Titan’s revenue growth trajectory could moderate. Titan shares are down nearly 7% from their 52-week high 2791 Viewed each October. According to Bloomberg data, Titan’s stock is trading at around 59 times FY24 estimated earnings. Valuations can limit significant near-term volatility.
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