Titan Q4 Results Review - Miss On Profitability; Sustaining Focus On Growth: Motilal Oswal

Motilal Oswal Report

Titan Company Ltd. posted consolidated sales growth of 21% YoY in Q4 FY24, marginally better than our estimate. However, Ebit margins across segments were weak, leading to an overall 8% miss on Ebitda in Q4 FY24.  jewelry sales (ex-bullion) grew 22% YoY, with double-digit growth in the number of buyers.

The studded ratio expanded to 33% (same YoY). Net store additions were slow, at 39 in Q4, bringing the total to 937 stores (174 store additions in FY24). Like-for-like growth for Tanishq was healthy at 14% (15% FY24), while Caratlane’s growth was slower at 3% in Q4 FY24 (6% FY24).

The Jewelry segment’s Ebit growth was slow at 9% YoY; the segment witnessed gross margin pressure, which was due to high consumer offers and gold inflation (11% YoY). Standalone Ebit margin (ex-bullion) was 12.1% (flat QoQ) versus 13.2% YoY. In the rising competitive environment, Titan Company preferred growth over profitability to sustain its competitiveness.

The watch segment grew by only 6% YoY due to pricing cuts taken by the company to remain competitive in the market. Analog watches rose 9% YoY, while Wearables grew 3% YoY during the quarter.

The near-term growth outlook appears subdued due to high gold inflation affecting demand sentiments, which is a typical trend during inflationary periods. However, despite the near-term jitteriness, the company remains aggressive in its growth outlook, driven by new store additions, attractive designs, and market share gains, et al. Titan Company also maintains a Jewelry Ebit margin of 12-13% for FY25. We will monitor the near-term consumption trend.

However, due to competitive pressure on margins, we cut our earnings per share estimates by 6%/ 5% for FY25/26. Reiterate Buy with a target price of Rs 4,100.

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