Titan Q4 preview: A shift in the wedding season may help net profit increase by 50% to Rs 737 crore. Titan’s EBITDA margin was estimated by brokerages to be 11.6 percent, up from 10.7 percent in the same quarter last year. When Titan Company Ltd. releases its results for the March quarter on May 3, it is anticipated to show a year-over-year increase in its standalone profit after tax (PAT) of 50% at Rs 737 crore.
According to the operating update, the jewels and watchmaker’s income is expected to increase by 25% annually to Rs 9,095 crore. According to a survey of brokerages, the EBITDA margin increased from 10.7 percent to 11.6 percent in the most recent quarter.
Kotak Institutional Equities analysts noticed that an ex-gratia payment to employees had a negative impact on the margin for the base quarter.
In the Q4 business update, Titan provided investors with information about the 2,710 new outlets that had been added to its retail network (including CaratLane) over the previous three months.
The ‘developing firms’ category saw the most growth, with sales increasing 84 percent YoY. The ‘Taneira’ brand of Indian dress wear is also included, as are fragrances, fashion accessories, and other clothing.
While the jewelry industry saw a 23 percent year-over-year growth, the watches and wearables segment saw a 41 percent YoY growth.
The essential aspect to keep an eye on will therefore be how demand developed in March when gold prices reached a fresh high of Rs 60,000.
According to Kotak analysts, “We gather that the quarter started on a strong note, but demand moderated a little in the month of March (high base + possibly some impact of sharp 8-10% increase in gold price).”
According to analysts at Nuvama Institutional Equities, the benefit of some wedding dates shifting from Q3 to Q4 FY23 may counterbalance that impact.
The Street estimates a 12 percent EBIT margin for the jewelry industry, with greater studded sales and operating leverage as support. EBIT margin is estimated to be 11.2 percent for watches and 17 percent for eyewear.
In an effort to maintain margins in a highly competitive climate and deal with demand headwinds brought on by rising gold prices, the business has reduced franchisee incentives for Tanishq outlets. Strong sales of watches and wearables, along with the company’s new business lines, helped to boost revenues in the fourth quarter update. However, the stock performance indicates that investors are not motivated. The market is telling Titan that its performance is strong, but so is its stock price. Thus, it would seem, the desperate attempt to defend margins.
