Titan Company Limited has started this financial year (FY23) with a bang. In its quarterly update for the three months ended June (Q1FY23), the company said that its jewelery business, excluding bullion sales, posted year-on-year (YoY) growth, which was a better-than-expected performance. True, it was helped by the lower base as well. Still, growth is healthy on a three-year compound annual growth rate (CAGR) basis.
“The three-year CAGR has increased to 23% in Q1 FY23, from 15% in 4QFY22,” believe analysts at Kotak Institutional Equities. The broking firm believes that there may be some demand suspension for Q4FY22 to Q1FY23, when jewelery sales were hit. Sharp 8-10% rally in gold prices. According to Kotak, “Given the strong revenue growth print in Q1, Titan can deliver 22% growth in standalone jewelery sales in FY13, even as compared to Q2-Q4FY23E flat-year- With year-on-year sales.”
Titan’s jewelery business is its mainstay, accounting for the lion’s share of its revenue. The demand momentum during the last quarter, Akshaya Tritiya, was stronger in the month of May, after two years of Covid induced lockdown in this period. In that sense, the last quarter was almost a normal Q1 post pandemic. Growth in plain gold jewellery was nearly three times. Titan said, the studded mix was better than last year and at par with the pre-Covid levels seen during Q1.
Titan’s watch business, the next big revenue contributor, also did well, registering its highest quarterly revenue in the first quarter of FY13 and a year-on-year growth of 158% on growth across all brands and products.
The company says that overall sales in Q1FY23 grew 205% year-on-year on a low basis and registered a three-year CAGR of 20.5% as compared to Q1FY20.
Unsurprisingly, the company’s solid performance has delighted investors in its shares. The stock was up more than 5% in Thursday’s morning trade on the National Stock Exchange. Despite this, note that shares are still down 31% from their 52-week highs seen in March. In general, higher valuation stocks have declined in recent months amid widespread market pain.
Besides, gold prices remain elevated and concerns about impact on jewelery purchases may weigh on the sentiments of Titan, whose valuation is still not quite cheap, as the stock is expected to yield earnings for FY24. are trading at around 53 times of Rs. “We understand that although the company has delivered a strong performance in Q1FY23, concerns remain regarding the import duty hike,” analysts at Antique Stock Broking said in a July 7 report. Recently, the government has increased the effective import duty on gold from 10.75% to 15%. Needless to say, investors will do well to track the impact on demand.