Titan Q1 earnings preview: High gold prices, fewer wedding dates to affect margins

Gems and jewellery maker Titan Company will announce its Q1 earnings today. The firm is likely to report a muted quarter in terms of margins as analysts expect high gold prices and fewer wedding dates to affect its business. Brokerage Motilal Oswal expects the bottomline to grow around 10% year-on-year. Jewellery segment is likely to see a revenue growth of 9% YoY (ex-bullion), with a five-year revenue CAGR of 20%.

Gross profit margin is expected to climb 50 bps YoY to 22.7%. There would be pressure on margin due to increase in competition and gold prices, the brokerage said in its earnings preview.

Another brokerage Kotak Equities sees a 12% YoY growth in standalone jewelry sales (excluding sale of gold bullion; versus 19%/23% growth in 4Q/3QFY24), partly impacted by a sudden rally in gold prices by 15% in the past six months. It also expects a 15% growth in watches division and a 11% growth in eyewear (versus weak 2HFY24).

“We expect standalone jewelry EBIT margin of 10.8% (down 20 YoY). We note that jewelry EBIT margin in the June quarter is usually 100-125 bps lower than full-year margins, owing to lower studded sales (we expect studded share in 1QFY25 to drop by 100 bps yoy to 25%),” said Kotak Equities

“In addition to this, higher competitive intensity resulting in rationalization of gold rate mark-up, higher investments in gold exchange programs and gold rate protection offers (necessitated by sharp rise in gold price) are offsetting the gains from operating leverage and a reduction in franchisee commissions. Titan FY2025E consolidated jewelry EBIT margin guidance band is 11.5-12.5%. We estimate a 9%/8% EBIT margin for watches/eyewear in 1QFY25,” it added

InCred Equities expect revenue to rise 10% to Rs 13,086.9 crore in the June 2024 quarter. Net profit   is seen climbing 8.3% to Rs 815.3 crore.

“Titan Company’s jewellery division is expected to post a 9% yoy sales growth in 1QFY25F due to elevated gold prices, low wedding dates and weaker studded mix. The performance is weak considering that Kalyan Jewellers/Senco Gold are expected to post 27%/11% yoy sales growth, respectively,” said  InCred Equities.

In the March 2024 quarter, Titan reported a 7% year-on-year rise in profit compared to Rs 734 crore in the same period last year.

Titan reported a 16% rise in revenue to Rs 11,257 crore for the January to March period. The board also recommended a dividend of Rs 11 per equity share for financial year 2024.