Titan Company (₹3,375.95) released its results for the first quarter of the financial year 2024-25 on August 2 post market hours. While the shares fell by 2.4 per cent on Monday, this can largely be attributed to the broader market fall.
The topline expanded, but the margins dropped. The consolidated revenue for Q1FY25 went up nearly 13 per cent year-on-year (yoy) to ₹12,223 crore. EBIT (Earnings Before Interest & Tax) and net profit margins shrank.
The EBIT margin for Q1FY25 stood at 9.8 per cent, compared with 10.2 per cent for the same quarter of the previous year. The net profit margin, too, dropped – it was at 5.8 per cent in Q1FY25 as against 7 per cent in Q1FY24.
The first six weeks of the quarter, which included Akshaya Tritiya, were the supporting factor. But the increase in gold price (about 20 per cent compared to Q1FY24), election led restrictions in many markets, fewer wedding dates and heat waves across the country impacted demand which, in turn, weighed on margins.
Segmental performance
The company operates under four segments viz. jewellery, watches and wearables, EyeCare and emerging business. Jewellery remained the largest, contributing 88 per cent to the total revenue. This is followed by watches and wearables with nearly 8 per cent contribution.
Total income for Q1FY25 from jewellery stood at ₹11,808 crore, growing a little over 10 per cent over Q1FY24. This includes bullion sales of ₹908 crore. The EBIT margin went up by 15 basis points yoy (year-on-year) to 11.2 per cent. The new-buyer contribution was 45 per cent for the three-month period.
Tanishq, the jewellery brand of Titan company, added 11 new stores (net) in the country. Also, 19 stores under the banner Mia and three under Zoya were opened in the quarter.
In the watches and wearables segment, total sales were up 12 per cent to ₹1,023 crore for the first quarter of FY25. The overall growth was powered by a 16 per cent sales growth in watches under the Titan brand. However, the Average Selling Price (ASP) dropped 6 per cent yoy. The ASP also saw a decline in EyeCare by 4 per cent yoy. This is despite an increase in revenue and number of buyers by 3.4 per cent and 8 per cent respectively. So, broadly, the dip in profits from EyeCare (₹19 crore for Q1FY25 versus ₹35 crore for Q1FY24) impacted on the overall net profit margin.
CaratLane, a key subsidiary of Titan, posted a revenue growth of 18 per cent to ₹754 crore for Q1FY25. Sales from the studded category improved 23 per cent, taking its contribution to 78 per cent for the quarter. EBIT for CaratLane stood at ₹38 crore with a margin of 5.1 per cent.
The company is likely to witness a short-term impact due to value loss because of the cut in import duty, announced in Budget 2024. According to the management, this is likely to be expensed over the next two quarters.
That said, the duty cut can have long-term positive implications for the jewellery industry. Titan Company being the leading player in the industry, is expected to capitalise on it the most. However, the stock continues to trade at high valuations, at 87 times its trailing earnings currently.